One of the biggest concerns surrounding any bankruptcy case is this – what happens to the tax debt? This becomes even more complicated when a divorce is involved. Is it possible to eliminate the tax debt owed to the IRS and other taxing agencies when you file for bankruptcy? Although there are certain debts that cannot be discharged, such as child support payments, it is possible to eliminate your tax debt when filing for bankruptcy.

Discharging Tax Debt

You may be able to have your tax debt discharged in a Chapter 7 bankruptcy if all of the following circumstances are met:

  • It is an income tax debt
  • The taxes were from a tax return that was due at least 3 years prior to filing for bankruptcy
  • It has been at least 2 years since the tax return was filed
  • There was no tax fraud involved or attempts to evade the tax
  • The taxes were assessed against you at least 240 days before you file for bankruptcy

These are the minimum requirements for discharging any federal or state income taxes. Keep in mind that every single circumstance is different, however, and you may or may not qualify for a tax debt discharge.

Handling Tax Debt

Knowing that you owe the IRS or other taxing agencies, such as the State Franchise Tax Board, the Employment Development Department and the Board of Equalization, can be a daunting thing to deal with day in and day out. It can be hard to focus on the simple pleasures in life having this looming debt always on the back of your mind. If you are currently struggling with tax debt, it will be worth your while to look into bankruptcy as a solution.

How We Can Help

Understanding and abiding by the rules and procedures of United States tax system can be difficult by itself. It will be made even more difficult if you are contemplating bankruptcy. Make sure you get the legal advice you deserve during this confusing time.

To schedule a free consultation to discuss bankruptcy, please contact our Minnesota bankruptcy lawyers – (612) 294.2200.