Federal income tax debt may be discharged under Chapter 7

On Behalf of | Apr 14, 2016 | Chapter 7 |

By now most readers of this Tennessee bankruptcy law blog have filed their taxes. Some people may have even received their refunds by now and put those recouped funds toward their savings, investments, or desired purchases. Tax time can be stressful for all individuals, but for those who are engaged in the bankruptcy process, dealing with taxes can impose a whole new level of anxiety.

However, individuals who are involved in the Chapter 7 bankruptcy process may be happy to know that their federal income tax debt may be discharged with their other debts. Not all tax debt is dischargeable, however. The remainder of this post will look at what a person must do in order to see his federal income tax burdens eliminated through Chapter 7 bankruptcy.

First, it is critical to recognize that only income tax debt is dischargeable under Chapter 7 bankruptcy. In order for it to be discharged, it must be at least three years old. Individuals may not seek to discharge recent income tax debts. Though the owed taxes must be at least three years old, the associated tax return also must have been filed at least two year prior to the commencement of the individual’s bankruptcy proceedings.

Second, the individual seeking to have his tax debt discharged cannot have committed any fraud or tax evasion in the process of filing his taxes or seeking bankruptcy protections. If an individual committed a crime in an effort to avoid his tax obligations, then those debts may not be discharged under Chapter 7.

There are other requirements that individuals must meet in order to see their income tax debts discharged under Chapter 7 consumer bankruptcy. Those who wish to learn if they are eligible for this bankruptcy protection are encouraged to speak with their bankruptcy attorneys and to review the facts of their individual bankruptcy cases.


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