Filing for bankruptcy protection may help a person either eliminate back taxes (called a discharge) or at least give the individual more time to pay them back. However, the particulars of the case must meet certain requirements.

Identification

In order to completely discharge taxes in a bankruptcy case, a person must owe payment on the taxes for at least three years and have voluntarily filed tax returns. Taxes owed within 240 days of filing bankruptcy protection are ineligible for discharge.

Types

Each chapter of bankruptcy law treats tax obligations differently. Chapter 7 bankruptcy can completely wipe out tax debt, while Chapters 11 and 13 only lower the obligation to some percentage less than 100 percent.

Exceptions

Once a taxing authority secures the tax obligation, such as by issuing a lien against the person's house, the individual must pay back the taxes secured by the lien in full, plus interest.

Tips

If tax debts do not qualify for discharge, then filing under Chapter 13 may grant the debtor up to 60 months to pay the Internal Revenue Service or other taxing agency.

Considerations

Bankruptcy law constantly evolves, and even tax lawyers may not fully comprehend whether a person's tax debt may be discharged under the law. Still, a person should at least consult a bankruptcy lawyer when trying to wipe out tax debt through bankruptcy.

Source:

FlumeLaw.com; HELP WITH PAST DUE TAXES

ETaxes.com; Can I Get Rid of My Taxes in Bankruptcy?

LegalLawHelp.com; Discharging Taxes in Bankruptcy

More Information:

LegalLawHelp.com; Bankruptcy Attorneys