Bankruptcy Can Eliminate Income Tax Debt

One of the most effective ways to eliminate back taxes owed to the IRS can be to file a Chapter 7 bankruptcy. A bankruptcy filed for tax purposes, sometimes called a tax bankruptcy, will eliminate certain income tax debts. If the taxes owed are income taxes, after a period of time they become dischargable in bankruptcy. Although the rules are complex, a good rule of thumb is that if three years have passed since you filed your taxes, you ought to look at bankruptcy as a potential soultion to your tax debt.

A recent client I will call “Chris” came to see me. Chris was deeply distressed and owed over $35,000.00 to the IRS. The IRS was about to seize money from his bank accounts and garnish his wages. He was having a hard time paying his bills and feeding his kids as it was. After our consultation, he filed a Chapter 7 bankruptcy and now his tax debts are gone. Chris is in good standing with the IRS, and is debt free. Chris looks like a new man. “I never knew it could be this easy”, he told me.

Tax bankruptcies are not the answer in every situation, but they are a powerful tool to consider if you owe thousands in back taxes.