Taxes And Bankruptcy

Owe Back Taxes? Contact a Lawyer Today.

When you owe money to the government, you will quickly find that it has many more ways to collect on debts than banks and other private lenders do. However, in some cases, the bankruptcy process can be used to reduce the consequences of tax debt.

I'm Steven Bilsky, a Memphis-based attorney with more than 30 years of bankruptcy experience. For help understanding your options for dealing with taxes through bankruptcy, contact me to schedule a free consultation.

When Can the Bankruptcy Court Eliminate Your Tax Debts?

Most tax debts owed to the Internal Revenue Service (IRS) or Tennessee Department of Revenue cannot be eliminated or reduced in bankruptcy. However, there are some exceptions. You may be able to get income tax debts discharged if all of the following are true:

  • You filed your return on time
  • The taxes were due more than three years ago
  • You did not commit any tax fraud

Trust fund taxes, such as employment and sales taxes, cannot be discharged because technically, you are just holding them on behalf of your employees or customers. Property taxes, in most cases, are secured by your property and cannot be discharged.

Can You Put Back Taxes on a Payment Plan?

Even if your tax debts cannot be discharged in Chapter 7 bankruptcy, it may be possible for you to pay them off through a Chapter 13 repayment plan. These plans give you three to five years to pay back your debts with no interest, late fees or other penalties.

In most cases, the terms of Chapter 13 bankruptcy payment plans are much better than the terms of installment plans offered by the IRS. To discuss whether bankruptcy is the best way for you to deal with your back taxes, contact me today.

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