Tax Debt

The Los Angeles Bankruptcy Firm helps people throughout Southern California find a way out when they are buried in debt, including relief from overwhelming tax debt through a Chapter 7, Chapter 11, or Chapter 13 bankruptcy.

Only certain tax debts are dischargeable in bankruptcy.  Unless the tax debt meets certain criteria, you may come out of a bankruptcy still liable to pay those taxes.

So When is a Tax Debt Dischargeable?

In order for a tax debt to be dischargeable in bankruptcy, it must be related to a tax return with a filing deadline longer than three years ago, including any filing extensions which may have been granted.  Also, the debt must relate to a return that was filed at least two years ago.  The tax assessment itself must be at least 240 days old.  The tax return cannot be fraudulent, and the taxpayer must not be guilty of tax evasion.

Only federal income tax debt is eligible for a bankruptcy discharge, as opposed to state income taxes, payroll taxes, estate and gift taxes, or other taxes.  Also, if the IRS has already recorded a tax lien on your property, the tax debt is secured by the property and therefore not dischargeable.  In fact, you can face foreclosure on the property if you do not arrange to have the debt paid off.

Finding the Solution That Works For You

There may be other options to settle a tax debt short of filing for bankruptcy, such as setting up an installment payment plan with the IRS or negotiating an offer in compromise.  The Los Angeles Bankruptcy Firm is familiar with many alternatives to bankruptcy when tax debt is your major concern and can counsel you on all the available options.  Contact The Los Angeles Bankruptcy Firm for a free consultation regarding your tax debt.