Chapter 7 Taxes Dischargability

For those persons entering into a Chapter 7 bankruptcy with significant tax debt, they may be able to discharge some taxes. Those tax debts which are the product of taxes that were properly filed more than 3 years ago may be eligible for a Chapter 7 discharge. Taxes that were not properly filed or filed more recently than 3 years ago will not be eligible for a discharge.

If you find that you have taxes in a non-dischargeable category, you may wish to avail yourself of the tax negotiation product provided by the IRS. Among these include abatements, in which the debtor petitions the IRS to remove their penalties and interest. An Offer in Compromise, where the amount owed on taxes is reduced downward to an amount based on the debtor’s ability to pay or through an Installment Agreement. An Installment Agreement is an agreement between the debtor and the IRS that allows the tax debt to paid off in installments over a set amount of time.

If you do have tax debt that cannot be handled in your bankruptcy, you should inform your bankruptcy attorney of the debt, they may be able to direct you or give you guidance as how to best deal with the tax debt following your bankruptcy filing.

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