Your tax obligations may pile up more rapidly than you can wrap your head around. Namely, you may be overwhelmed with juggling the property taxes owed on your real estate, the employee trust taxes withheld by your company, the federal and state taxes on your income, and more. It may be difficult, if not impossible, to eliminate your financial responsibilities toward paying off these tax debts, even when you file a bankruptcy petition. Continue reading to learn the types of taxes that can be cleared in a bankruptcy filing and how an experienced Lousiville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can ensure this effectively happens.

What types of taxes can be cleared in a bankruptcy filing?

Unfortunately, we must report that most taxes cannot be cleared in a bankruptcy filing. However, the one exception to this rule is federal or state income tax debt. But this is only if this certain debt meets certain eligibility criteria. So, to see if yours qualifies, you may want to ask yourself the following questions first:

  • Can I confirm that these debts are specifically attributed to my federal and/or state income taxes?
  • Can I confirm that these debts have nothing to do with a willful attempt to evade paying my taxes or file a fraudulent tax return?
  • Can I confirm that these debts are at least three years old (i.e., dating back at least three years before my bankruptcy filing date)?
  • Can I confirm that I filed a tax return for these debts at least two years ago (i.e., dating back at least two years before my bankruptcy filing date)?
  • Can I confirm that the Internal Revenue Service (IRS) reviewed these debts at least 240 days ago (i.e., dating back at least 240 years before my bankruptcy filing date)?

Under what conditions can these taxes not be discharged?

You may be able to confirm, without a doubt, that your tax debts are eligible for a bankruptcy discharge. But sadly, there may still be extenuating circumstances that make this difficult or impossible to achieve. For example, the Kentucky bankruptcy court may not eliminate liens on your real estate if the IRS or a state authority already recorded a tax lien before your filing date. Or, the court may not eliminate your credit card balance used to pay off your nondischargeable tax debt.

One resolution for this, if you are undergoing Chapter 7 bankruptcy proceedings, is to have your trustee sell your property and put the proceeds toward your priority debts. This is because your tax debts are considered priority debts. Or, if you are undergoing Chapter 13 bankruptcy proceedings, you may want to fight to eliminate as many dischargeable taxes as possible. This is so paying off your nondischargeable taxes in full is made more manageable.

In any event, what you need the most is likely strong legal representation from a skilled Louisville, Kentucky consumer bankruptcy lawyer. Someone at Schwartz Bankruptcy Law Center is looking forward to your phone call.