Does Bankruptcy Clear Tax Debt?

As the old adage goes, two things are certain in life: death and taxes. If you’re filing for bankruptcy, though, you may have questions about whether or not you’ll need to pay taxes, as well as whether your bankruptcy filing will clear your tax debt. At the office of Deborah Gold-Alexander Attorney at Law, we have answers. To learn more, call our Massachusetts bankruptcy lawyer directly today.

Taxes and Bankruptcy: What You Need to Know

The laws pertaining to tax payments, tax debts, and bankruptcy are confusing, and there is no one-size-fits-all answer to whether or not your tax debts will be dischargeable in a bankruptcy hearing. 

The first thing that will affect your ability to have your tax debts discharged is the type of bankruptcy for which you file. If you are filing for a Chapter 7 bankruptcy, the discharge of your tax debts is more likely than if you’re filing for a Chapter 13 bankruptcy. As explained by the Internal Revenue Service (IRS), at the conclusion of your Chapter 7 bankruptcy case, you’ll receive a discharge of debts, which will release you from personal liability for those debts. As part of this, some tax debts may be dischargeable; however, federal tax debts are usually only dischargeable if the tax debt is an income tax debt, you did not willfully evade taxes or commit fraud, the debt is at least three years old, and you filed a tax return. It’s important to talk to a bankruptcy attorney to garner information specific to your case.

Usually, if you are filing for a Chapter 13 bankruptcy, you will need to repay your tax debts, but how much you have to repay can vary depending on the classification of the debt. 

Will I Receive a Tax Refund During My Bankruptcy Proceeding?

If you have filed your taxes and are owed a tax refund from the IRS, receiving your refund can provide much-needed financial comfort if you’re facing large amounts of debt. While it is possible to receive a tax refund during a bankruptcy proceeding, the IRS may also reserve the right to turn over the return to the bankruptcy trustee who’s managing your case, delay processing your return, or even keep your return and use it to pay down tax debts that you owe. Again, if you are owed a refund and are in the middle of filing for bankruptcy or are thinking about filing for bankruptcy, you should consult with an attorney who can provide you with information that’s specific to you.

Call Our Massachusetts Bankruptcy Attorney Today

Filing for bankruptcy is a complex process, and one that’s often full of confusing language, terms, and conditions. If you are filing for bankruptcy and have questions about how your tax debts may be affected, call our Massachusetts bankruptcy attorney, Deborah Gold-Alexander Attorney at Law. Deborah Gold-Alexander has more than 30 years’ experience working with clients like you and is available to review your case at your convenience.