How Waiting to File Bankruptcy May Discharge Tax DebtMany are under the impression that tax debt cannot be discharged through bankruptcy.  Yet, tax debt could qualify for elimination under certain conditions in either Chapter 7 or Chapter 13 bankruptcy .

Tax debt may be eligible for discharge under these requirements:

  • Three years before filing your petition your taxes were due.  The timing may vary if tax returns related to outstanding tax debt had an extension request.
  • Two years before filing your petition you filed your tax returns.  This means tax returns have been filed for years before filing for bankruptcy protection.
  • Tax debt should be accessed 240 days before submitting your bankruptcy petition.  This means the Internal Revenue Service (IRS) has reviewed your debt before your filing. Timing on this may vary if an offer in compromise was submitted before the filing.
  • No fraud or tax evasion was committed.  It’s unlikely you’ll be granted a discharge for outstanding tax debt if tax fraud was committed or you purposely tried to evade tax payments.

You may still need to satisfy debt if you have a tax lien before your bankruptcy is filed.  A lien may be against your property but if you sell it, the IRS may look to satisfy outstanding taxes owed from proceeds.  On the other hand, the filing may wipe your personal obligation to pay.  Since certain requirements have time restrictions this may be an advantage for you in getting tax debt discharge.  If you are considering bankruptcy as an option for tax debt, discuss your situation with an experienced Dallas bankruptcy attorney .