Can I Discharge Taxes in Bankruptcy?

One of the common misconceptions about Chapter 7 bankruptcy is that it doesn’t allow for the discharge of tax liability.  While it can be difficult to wipe out tax debt by filing for bankruptcy, it’s not impossible.  Indeed, debtors who meet specific requirements when it comes to bankruptcy and tax liability may be able to discharge those debts.
However, it’s important to keep in mind that bankruptcy law itself is quite complex, and the laws governing tax debt and bankruptcy are even more complicated.  As a result, it will be extremely important to have an experienced Chicago bankruptcy lawyer who can examine the details of your financial situation.  At the Emerson Law Firm, we have been assisting consumers in the Chicago area for years, and we can take a look at your case today.  Filing for personal bankruptcy may be a solution to discharging your income tax liability.
How Do I Know If My Tax Liability is Dischargeable?
First of all, getting rid of debt is different depending on whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.  While filing for a Chapter 7 bankruptcy means that the debtor can wipe out most of his or her debts and have a fresh start, Chapter 13 bankruptcy is more of a reorganization process that results in the debtor making payments based on an agreed-upon repayment plan.  However, generally speaking, income tax debt must meet a number of criteria in order to be dischargeable through bankruptcy.
What are the requirements for discharging tax debt?  If your income tax debts meet the following criteria, it may be possible to discharge those debts by filing for personal bankruptcy:
First, the tax return from which you owe the debt must have been due for filing more than 3 years prior to the date that you decided to file for bankruptcy.  This requirement might sound confusing, but it’s actually pretty easy to grasp.  For example, let’s say you had an income tax return due for filing on April 15, 2011, and that’s the return from which this tax debt developed (in other words, even if you filed late, it’s the date the return was due that counts here).  Now, you need to wait more than 3 years from the date for which that return was due before filing for bankruptcy if you want that tax debt to be eligible for discharge.  Under the example of April 15, 2011, you’d need to have waited until at least April 16, 2014 to file for bankruptcy.
Second, that tax return that led to your income tax debt must have actually been filed at least two years prior to the date you decided to file for bankruptcy.  Under the example presented above, assuming that you filed for bankruptcy on April 16, 2014, you’d need to have filed that tax return on April 15, 2012 or earlier.
Third, you’ll need to wait more than 240 days from the time the IRS assesses your tax debt and when you file for bankruptcy.  So the three key dates involve the filing due date of the return, the actual filing date of the return, and the date on which the IRS assessed the tax that’s due.  Meeting these requirements doesn’t necessarily mean that you’ll be able to have your tax debts discharged, but you’ll need to meet them in order to have the possibility on the table.
At the Emerson Law Firm, we have been helping residents of the Chicago area with bankruptcy proceedings for many years.  Contact an experienced Oak Park bankruptcy lawyer at our firm to learn more about how we can help you handle your debts.
See Related Blog Posts:
Top Consumer Debt Complaints in Illinois

Comments

Post a Comment

Popular posts from this blog

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more