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West Palm Beach Bankruptcy & Business Attorneys > > Bankruptcy Attorneys > Filing Bankruptcy For The Purpose of Tax Relief

Filing Bankruptcy For The Purpose of Tax Relief


If you are facing overwhelming tax debt, you may feel overwhelmed and are looking for options to help you pay or reduce your tax burden. If you are looking at a mountain of debt, you may be considering filing for either Chapter 7 or Chapter 13 bankruptcy. These two types of bankruptcies are very different. A Chapter 7 bankruptcy takes a shorter amount of time and allows you to discharge many of your debts. Chapter 13 bankruptcy takes much longer and allows you to create a reorganization plan to repay your debts. If you have tax debts and are considering filing bankruptcy for the purpose of tax relief, you should understand your legal rights and options.

Chapter 7 Discharge of Tax Debt

The good news is that you may be able to discharge (eliminate) your tax debts under Chapter 7 bankruptcy. However, there are some very strict conditions that must be met under the law in order for the court to consider your tax debt dischargeable in a Chapter 7 bankruptcy. Specifically, the following items must all be met in order to be eligible for tax debt to be discharged.

  • The tax debt must be greater than 3 years old.
  • The taxes that are owed are income taxes, not payroll taxes from a company.
  • A tax return was filed at a minimum of 2 years ago.
  • A tax assessment was done over 240 days ago.
  • There is no appearance of any type of tax fraud or tax evasion.

These conditions are nonnegotiable and established within the Federal Bankruptcy Code at 11 U.S.C. Section 523 and 11 U.S.C. Section 507. If these conditions are not all met, tax debts will not be eligible to be discharged within a Chapter 7 bankruptcy.

Additionally, many people have taxes that they owe. It is important to note the distinction between tax debts and amounts owed from unfiled taxes. If you have taxes that are owed from unfiled taxes, they will not be considered dischargeable in bankruptcy.  Additionally, you must prove that your last 4 tax returns have been filed appropriately with the Internal Revenue Service (IRS).

Settlement With The IRS

If you are considering bankruptcy only due to large tax debts, you may want to consider negotiating directly with the IRS prior to filing for bankruptcy. There are cases where the IRS may offer you settlement options that reduce the amount of your debt or offer compromises regarding the debt owed. There are never any guarantees provided by the IRS, however, it may be beneficial to at least attempt to reach some sort of compromise or resolution prior to filing for bankruptcy solely to eliminate tax debt.

Reach Out to Us Today for Help

If you are planning on filing for bankruptcy due to tax debt, you may have several legal options available to you. Contact the experienced West Palm Beach bankruptcy attorneys today at Kelley Kaplan & Eller at 561-264-6850 for a consultation.


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