IRS - Bankruptcy
You can stop the IRS from temporarily collecting tax debts when you file for bankruptcy. The automatic stay is created and stops most creditors from trying to collect from you. Once the bankruptcy case is closed or dismissed, the automatic stay is lifted and creditors can continue their collection efforts. An automatic stay can also be lifted via a special court order. The type of bankruptcy you file will determine if your tax debt is discharged or not.
Chapter 7 bankruptcy will only wipe out taxes that are income-based that meet a certain number of criteria.
- Tax return was due at least three years ago
- Filed tax return at least two years ago
- Taxes were assessed at least 240 days ago
- No fraud or willful evasion
What is Not Dischargable?
- Tax liens are no dischargable in Chapter 7 bankruptcy.
- Recent Property Taxes
- Employment Taxes
- Erroneous tax refunds
Chapter 13 bankruptcy will allow you to work with the IRS and pay off your tax debts through a repayment plan that is typically between 3 to 5 years.