Tax Debt In Bankruptcy

Tax Debt In Bankruptcy

Bankruptcy can either get rid of your tax debt or it can help you “consolidate” and pay off the debt in a 3 or 5 year plan.

Tax Debt In Chapter 7

As long as you qualify, a Chapter 7 can discharge your tax debt that was due more than 3 years from the date that you file. Example: Say you file bankruptcy today, October 9, 2018. You filed your taxes on April 15, 2015. Whatever back taxes you owe for 2015 or older is dischargeable. If however you didn’t file your 2015 until October 15, 2015, then you would have to wait until October 16, 2018 to discharge that debt.

240 Day Rule

Say you filed your 2015 taxes on January 1, 2015. You would have to wait until August 2, 2015 or after to file for bankruptcy to get rid of your tax debt. This rule is in place to avoid having people file all their back taxes right before filing for bankruptcy and being able to get rid of them.

Tax Debt In Chapter 13

Lets say you can’t get rid of your tax debt. You can file a Ch13 and essentially pay off your total tax debt in a 3 or 5 year plan. Whether or not you are in a 3 or a 5 year plan depends upon your income and the total amount of debt you have. The benefit to this option is also that your tax debt does not continue to accrue interest and penalties.

Tax Debt In Chapter 20

Chapter 20 is when you file a Ch7, receive a discharge, and then file a Ch13. This is beneficial for people who have other credit card debts in addition to non-dischargeable tax debt. You get rid of your credit card debt in the Ch7, then file a Ch13 just to pay off tax debt.


Dischargeability of tax debt is complicated and dependent on each individual person’s situation. Contact this office for a free 30 minute consult to discuss your particular situation.

Stay Tuned next week for information on property tax and business related taxes.

**this post is not legal advice.

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