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Can I Discharge State and Federal Income Taxes In Bankruptcy? – Janet

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I have been self employed for over twenty years and I owe a substantial amount of federal and state income taxes..I cant foresee ever paying it off and I wanted to know if these debts are forgiven in bankruptcy

Can I file for bankruptcy for a fresh start or is there any other options?

Janet

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4 Comments

  • We live in New Jersey. We just filed Ch 7 and were told no taxes can be included.  B/C its a wipe out, not a repay, they will not include it.  Ours is for last year – and we paid most of it – only $10K left.  We are on a payment plan w/ the Feds. Since all our remaining debt was eliminated it makes it much more realistic to pay this down now. Hope you get the right information on the state you are in.

  • I recently filed a B13 and had back taxes included in the settlement. This avoids mounting interest and penalties but does not reduce the amount owed. You just pay it out over a 3 to 5 year period.

  • I would suggest speaking with a tax attorney. It’s possible that you might be able to reach a settlement, as opposed to filing for bankruptcy.  

  • Hello Janet,

    Yes you can discharge taxes in bankruptcy provided they meet certain criteria. I don’t know all the criteria off the top of my head, but some of the conditions to be eligible are that the taxes must be from at least 3 years ago and the returns would have to have been filed at least 2 years ago.

    The best thing to do is schedule a consultation with a local attorney so that they can review the specifics of your case and let you know exactly what is or is not able to be discharged in a BK.

    You can find a local bankruptcy attorney to speak with using our Bankruptcy Attorney directory.

    If it turns out that a BK filing would not work well and you need to look at some potential alternatives, you can schedule a phone consultation with me. You can learn more about my consulting service at DamonDay.com

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