Unless you are expecting a refund check, any correspondence from any taxing authority is always bad news.  Personal bankruptcy, through Chapter 7 or Chapter 13, can sometimes eliminate some tax debt.

Whenever the lawyer uses words like “sometimes” and “some”, you know there is more to the story.  There are basically two types of tax debt that bankruptcy may discharge:

  1. Income tax (not payroll tax or anything else)
  2. Property tax

According to the Bankruptcy Code, income taxes are generally dischargeable in a Chapter 7.  The primary qualifications are that the tax must have been due at least three years prior to the bankruptcy filing, and the corresponding return filed at least two years prior to the bankruptcy filing.  Tax liens, evidence of income tax evasion, and other factors can affect discharge.  After the attorneys at Henley and Henley explore your unique financial situation, you can receive the unique answer that you deserve.  Property taxes fall into that same category; property taxes are generally treated like any other unsecured debt.

Chapter 13 debtors face a slightly different situation.   A rule of thumb is that if the tax return has been on file for more than four years, then the income tax is dischargeable.  Any other taxes (income taxes or property taxes or whatever) will probably be paid through the Chapter 13 Plan.

Both the Tax Code and Bankruptcy Code are full of mandatory provisions and hidden loopholes.  Call today for your free consultation, and the bankruptcy attorneys at Henley and Henley will work hard to find the most wallet-friendly repayment plan available.