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Taxes and Chapter 13 Bankruptcy

When someone files a bankruptcy and tax debt is owed, most of said taxes are considered priority debts in bankruptcy. What that means is that you can't wipe out or eliminate your tax obligation simply by filing a bankruptcy. Rather, the Bankruptcy Code requires that you payoff your tax liability through a repayment Chapter 13 plan.

In a Chapter 13 bankruptcy, your debt liability can be paid back over a three to five year time frame. With that said, some tax debt can be considered non-priority claims. That is, they have to meet certain requirements, such as:

  • The tax return was due at least three years before you filed your bankruptcy (including any extensions you received)
  • You filed the return at least two years prior to filing for bankruptcy
  • The IRS has not assessed your liability for the tax debt within the 240 days before you filed for bankruptcy (with some limitations/exceptions), and
  • You did not commit fraud or willful tax evasion.
  • Tax debt can be daunting to face, so speaking with an experienced bankruptcy attorney is key. There are, of course, other factors that will determine the treatment of your tax liability in a Chapter 13, as well. Don't wait any longer; schedule a free consultation with Bournakis and Mitchell, P.C. today and let us provide you with some debt relief.

    **This information is not intended to be, nor should be, construed as formal declarations of legal advice.**