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Bankruptcy and Tax Debt

Bankruptcy and Tax Debt

Bankruptcy and Tax Debt

Bankruptcy can discharge tax debt.  It can also give you a more affordable way to pay back the IRS.   Certain requirements must be met.  These include:

  1. that the taxpayer is current with their tax filings
  2. the taxes were due at least three years before you filed for bankruptcy
  3. the tax debt was assessed approximately 8 months before filing for a bankruptcy
  4. there was no criminal tax evasion or fraud

If you are considering bankruptcy primarily because of tax debt you should speak to an Enrolled Agent to avoid repeating the same mistakes.

While Your Bankruptcy is Under Consideration

While your bankruptcy is under consideration of the court the IRS will not be permitted to continue their collection efforts.  This applies unless you have filed for bankruptcy more than once.  As a result, a court-ordered stay of collections may not be issued.  If this is not the first time filing for bankruptcy you should discuss other options for stopping collection efforts with an Enrolled Agent.

Chapter 7 vs. Chapter 13

In a Chapter 7 bankruptcy, the court will only discharge tax debt that is at least years old so once the bankruptcy case has been completed and closed the IRS is free to resume collection efforts on any remaining tax debt.    In a Chapter 13 bankruptcy, you may be able to negotiate a smaller payment plan with the IRS than they would normally accept.

Help Is Just a Phone Call Away

As stated previously, every client’s situation is different and while this advice can help guide you, it does not apply to every situation.  If you have a tax lien, you should speak to one of our Enrolled Agents before considering bankruptcy if your primary concern is tax lien release.  A consultation is free.  Our Enrolled Agents have almost 30 years of experience dealing with Federal and State tax debt.  Our blueprint for a long-lasting, successful business is offering straightforward, honest answers, providing quick tax resolution with no hidden fees.  To contact us visit for more information.  You can also call 561-293-3135.