Tax Debt and Chapter 7 Bankruptcy

August 2nd, 2011 | Author: | Law

Many people facing significant financial obligations which they are unable to pay have some unpaid tax debt. For many in this unfortunate situation, the best option for returning to financial freedom may be to file for bankruptcy. Chapter 7 bankruptcy offers protections from tax debts for many individuals.

Not all tax debts are dischargeable under Chapter 7 bankruptcy, however. Some forms of taxes, such as those withheld from paychecks, tax penalties assessed for unpaid taxes, and trust fund taxes cannot be forgiven under Chapter 7 bankruptcy. In addition, a filer must first meet certain criteria in order to be considered eligible for tax debt forgiveness.

Eligibility for Tax Debt Forgiveness

An individual can incur large amounts of tax debt for a variety of reasons, and handling that debt can be quite difficult. For this reason, tax debt forgiveness can make bankruptcy attractive to many individuals. However, in order to be eligible, they must first meet the following criteria:

  • Tax debt must be from income taxes only
  • Filer must not have committed tax fraud or willful tax evasion
  • The debtor must have filed a legitimate tax return at least two years prior to filing for bankruptcy
  • The return on the debt to be forgiven must be at least three years old
  • The IRS must have assessed the tax debt at least 240 days before the debtor filed for bankruptcy

If these requirements are met, an individual may be able to have some or all of their income tax debt forgiven through Chapter 7 bankruptcy.

Contact Us

If you or someone you know has significant income tax debt, Chapter 7 bankruptcy may be your best option. Contact the Milwaukee bankruptcy lawyers of the DeLadurantey Law Office, LLC, today at 414-377-0518 to discuss your situation with an experienced legal professional.



Comments are closed.