Tax Debt in Bankruptcy: Yes, It Can Be Discharged
Everyone thinks tax debt survives bankruptcy. Not always true. Certain tax debts can be discharged in Chapter 7 if they meet specific timing requirements. Miss one requirement and the discharge fails. Meet all three and the debt is gone.
The Three Timing Rules
Three-year rule: the return was due more than three years ago. Two-year rule: the return was filed more than two years ago. 240-day rule: the tax was assessed more than 240 days ago. All three must be satisfied.
What Can't Be Discharged
Fraud penalties. Trust fund recovery penalties. Taxes where no return was filed. Taxes from fraudulent returns. I analyze every tax year to determine which debts qualify and which don't.
Strategic Timing
Sometimes waiting a few months to file bankruptcy means the difference between discharging $100,000 in tax debt and discharging nothing. I calculate the exact dates and advise on optimal timing.
Bankruptcy vs. Other Options
Bankruptcy isn't always the best tool. An Offer in Compromise or installment agreement might achieve the same result with less collateral damage to your credit and financial life. I evaluate all options.