Understanding Complex Individual Income Tax Issues In Bankruptcy

As with student loan debt, it is very difficult to discharge income taxes in bankruptcy. Although not impossible, eliminating tax debt is only allowed if you meet a stringent and narrow set of criteria.

In order to discharge federal tax debt (as opposed to restructuring it), your debt must generally meet ALL of the following conditions:

  • The debt is related to income tax only
  • The debt is at least three years old as of the time you filed for bankruptcy
  • You filed a tax return for the debt at least two years prior to filing for bankruptcy
  • There is no evidence that you committed fraud or willful tax evasion
  • The IRS must have assessed the income tax debt at least 240 days before you filed for bankruptcy (this condition may also be satisfied if the IRS has yet to assess the debt)

As you can see, meeting these criteria is not easy. That being said, you may still be able to seek relief through bankruptcy even if you cannot discharge your tax debt.

Using Bankruptcy To Change Your Overall Financial Health

Even if a significant portion of your debt is related to taxes that prove to be non-dischargeable, you can still use bankruptcy as a tool to ease overall financial strain — with the help of a good lawyer, of course.

I am attorney John R.K. Solt, and I have been practicing bankruptcy law in Pennsylvania for the past four decades. Through personal bankruptcy, we may be able to discharge enough other debt (credit cards, medical bills, etc.) to improve your financial health and make you solvent once again. Doing so will allow you to start making manageable payments on non-dischargeable debt such as tax debt and student loan debt.

Call Me Today To Schedule An Appointment

Located in Bethlehem, my firm proudly represents clients living in the Lehigh Valley. To schedule an appointment to discuss your debt-relief options, call 610-601-5381 or fill out this online contact form.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.