Clark & Washington

Understanding Income Tax Debt

Chapter 13 bankruptcy is one of the best tools available to individuals who owe more debt than they can afford to pay. However, not all debts can be discharged in bankruptcy. When it comes to income tax debt, the specific circumstances of the debt will determine how it will be handled in your case

Understanding Income Tax Debt

Not all income tax debt is viewed the same in a bankruptcy case. Some of the factors th

at will impact the handling of your income tax debt include:

Discharging Income Tax Debt

Some income tax debt can be discharged in Chapter 13 bankruptcy. In general, you may be able to discharge any qualifying income tax debt, regardless of whether it has been secured by an IRS lien. However, if the debt is associated with a tax lien, you can discharge only your personal liability for the debt, but the lien will remain. Following your bankruptcy, the IRS will be able to seize your property to satisfy the unpaid lien.

To qualify as dischargeable, the debt must be associated with a return that was due at least three years before the bankruptcy, and you must have filed the return at least two years before the bankruptcy. In addition, the tax claim must have been assessed more than 240 days prior to your bankruptcy case.

You will not be able to discharge any tax debts that were the result of fraudulent activity or willful tax evasion.

Non-Dischargeable Tax Debts

If your tax debt is not dischargeable, it will be considered a priority debt for the purposes of your bankruptcy case. This means that you must include it in your payment plan and pay it in full. Some tax debts may continue to accumulate interest even after you have filed for bankruptcy, so it is important to understand how your specific debts will be handled.

Seeking Professional Assistance

Dealing with tax debts in bankruptcy can be complicated, and every situation is unique. If you are hoping to include income tax debts in a bankruptcy filing, the best way to determine how they will be handled is to contact a qualified bankruptcy attorney for guidance. At Clark and Washington, we have decades of experience handling bankruptcy cases in Atlanta. Please contact our office today to learn more about the filing process or to schedule a consultation with a member of our team.

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