Can I get rid of tax debt in bankruptcy?

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If you owe the IRS or Department of Revenue a tax debt, the taxes may be dischargeable in bankruptcy.  Tax debts are complicated, and your bankruptcy attorney will discuss those issues with you.   The answer to “can I get rid of tax debt in bankruptcy” is “maybe.”

There are several rules that determine whether a tax debt can be forgiven in bankruptcy.  Such factors include the age of the tax debt, whether a tax return was timely filed, and the type of tax that is owed.  A competent bankruptcy lawyer will know these rules and will be able to analyze which tax years you may or may not be able to wipe out in bankruptcy.

Even if you cannot get rid of tax debt in bankruptcy, taxes that must be repaid can often be repaid through a Chapter 13 bankruptcy case.  Paying taxes through a Chapter 13 plan typically results in a much lower monthly payment than a debtor could get from the IRS, and it prevents the IRS from being able to assess any interest and penalties on the amount owed.  Cutting off interest and penalties can save a tax payer several thousand dollars.

Anyone owing a tax debt would benefit from a free consultation with a bankruptcy lawyer to determine options that may save them money and the hassle of dealing with the IRS and/or North Carolina Department of Revenue.