While most taxes cannot be eliminated in a bankruptcy, there are certain situations which may allow you to discharge tax debt.
If you are seeking a liquidation of your debts, Chapter 7 may be your best option. Under Chapter 7, federal income taxes may be discharged if certain conditions are met, such as:
~ the taxes are income taxes
~ you did not submit a fraudulent return or willfully try to avoid paying taxes at any time
~ the tax debt is at least 3 years old
~ a tax return was filed on the debt in questions at least 2 years before you filed for bankruptcy, and
~ you pass the 240 day rule which generally means the income tax debt must have been assessed by the IRS at least 240 days before you filed bankruptcy
While some debts may not be dis-chargeable, such as student loans and income taxes which do not qualify, the debt that is eliminated through a chapter 7 bankruptcy can leave filers with more financial resources to tackle remaining debt. If your tax debt is more recent, you may also want to consider a Chapter 13 bankruptcy, which can spread payments over a 3 to 5 year period so you can get caught up.
If you are wondering if you are a good candidate for a Chapter 7 bankruptcy in order to eliminate debt including past due income taxes, it is a good idea to consult an experienced bankruptcy lawyer to determine if bankruptcy is a viable strategy for you. Contact the Peoria, Illinois bankruptcy law offices of Charles E. Covey to schedule a free consultation today at 309-674-8125.