One of the most common myths regarding bankruptcy is that a person may not have their tax debts discharged. This is false! While many outstanding tax debts will indeed still be owed at the end of a Chapter 7 bankruptcy or will need to be repaid in full in a Chapter 13 bankruptcy repayment plan, certain older income tax debts may sometimes be completely eliminated via bankruptcy in New York.
Generally speaking, federal income tax debts are dischargeable through Chapter 7 bankruptcy as long as all of the following conditions are true:
- The owed taxes are income taxes
- You did not commit fraud or willful evasion
- The debt is at least three years past due
- The debt to be discharged was filed in a tax return
- The income tax debt was assessed by the IRS at least 240 days prior to the date of your bankruptcy filing
If you are filing for Chapter 13 bankruptcy, it is likely that any nonpriority, unsecured tax debts will only need to be paid back in part. While your debts may not be completely wiped away through Chapter 13 bankruptcy, you will instead be given the opportunity to repay your tax debts over the life of your repayment plan with zero interest – eliminating the need to liquidate your assets and provide immediate payment under a Chapter 7 filing.
What Tax Debts Cannot Be Discharged?
Unfortunately, taxes which are classified as priority may not be reduced or discharged through bankruptcy. Tax debts which must be repaid in full include:
- Federal tax liens
- Property taxes
- Fraud penalties
- Payroll taxes
- Some employment taxes
- Non-punitive tax penalties
- Erroneous refunds
Overwhelmed with Debt? Call (888) 301-0584
If old taxes and other debts have you struggling to make ends meet, contact the New York Lawyers at the Law Office of Simon Goldenberg, PLLC today. Having earned a 10.0 “Superb” Avvo Rating and multiple Super Lawyers® selections for our unparalleled legal knowledge and results, our team of knowledgeable legal advocates have what it takes to help you overcome your debt and get on the road towards a new financial future.
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