Tax Debt and Bankruptcy

Personal income tax det can be discharged or eliminated, in some cases, by filing a Chapter 7 bankruptcy petition. There are many special rules that need to be followed and bankruptcy can not be used in cases of:

  • employment trust fund taxes,
  • or any time the IRS find out fraud or "tax-protesting" is involved. 

In addition, the law actually differs around the country (depending on what US Circuit Court district you reside in, that could mean totally different outcomes.

Another very common issues are

  • if the IRS filed Substitute Filed Returns
  • not waiting the correct amount of time to discharge.

It is important to get these right as if you can only file bankrutpcy ever 8 years.

Chapter 11 is mostly used by businesses.

Chapter 13 is usually used by individuals to negotiate a repayment. Our caveat is that usually the Chapter 13 repayment agreement is more aggressive than if you or your representative negotiated directly with the IRS