About Bankruptcy And Taxes

There is some truth to the old adage that the only certain things in life are death and taxes. Tax obligations are very difficult to eliminate, even for someone who files bankruptcy. Indeed, IRS back taxes can be included in a bankruptcy discharge only in certain situations, provided that you:

  • Filed your tax return on time
  • Did not commit fraud
  • Have not been able to repay back taxes dating back three years or more

If you are talking about bankruptcy and taxes in the same breath, one or more of these sample situations may be similar to yours:

  • You were self-employed and did not pay enough taxes on your earnings.
  • Your spouse incurred — and did not pay — taxes that you are also responsible for.
  • An accountant responsible for withholding taxes from your paycheck did not withhold the right amount and you are stuck with a big tax bill at the end of the year.
  • Your tax arrearage problem goes along with other burdensome debt problems such as medical bills, mortgage arrearage, home repair bills, unpaid child support and/or credit card debt.

Tax problems must not be ignored or you could face much worse problems than financial troubles. You could eventually go to prison if you do not take care of unpaid taxes.

The Good News: Debt Relief Through Bankruptcy Can Account For Taxes

Even if you cannot eliminate taxes in a bankruptcy, you can likely repay back taxes manageably, with reduced or omitted fines and penalties, through a Chapter 13 debt restructuring and repayment plan. Your monthly Chapter 13 repayment obligation will include your legal fees and will be calculated based on what you can afford.

At the conclusion of your three- to five-year scheduled debt repayment plan, your back taxes obligation should have been paid off and other debts that remain (such as credit card debt) will be discharged — eliminated.

What about other types of taxes such as city and county taxes, property tax or sales tax? An experienced attorney can answer your individual questions about debt relief, including specific tax problems. To understand your unique situation and options, you should contact a bankruptcy lawyer sooner rather than later. I am attorney April Perry Randle in Cleveland, Tennessee (TN), and I welcome your inquiry. Call 423-464-6908 or complete the online intake form to request a free consultation about debts, taxes and bankruptcy.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.