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For legal advice, consult with a Bankruptcy Attorney who is knowledgeable with handling tax debt in bankruptcy.
- Some or all of your taxes may be dischargeable in bankruptcy.
- Only individual income taxes are dischargeable.
- The taxes must be from a return that was:
- Due more than 3 years ago
- Filed more than 2 years ago
- Any additional assessments or changes made more than 240 days ago
- The taxpayer is not guilty of tax evasion
- The tax return(s) was not fraudulent
Filing a bankruptcy stops the Internal Revenue Service Collections immediately. The Internal Revenue Service is notified via computer by the Federal Bankruptcy courts. If you have a Revenue Officer assigned to your case, you must provide them with your case number and chapter as soon as possible.
If you own any property in which you have equity, the Internal Revenue Service may keep their tax lien and collection ability to the extent of the equity. e.g. if you owe the Internal Revenue Service $50,000 and you file a bankruptcy and you have a home with $10,000 equity (market value minus encumbrances); the Internal Revenue Service would be able to keep their lien in effect for the $10,000. Also the right to collect that $10,000 from you once you are out of the bankruptcy.
Exactly how all this works out depends on your particular circumstances and the bankruptcy chapter you file. See article on Bankruptcy and Tax Debts.
Consult with a Bankruptcy Attorney for exactly how bankruptcy may affect you.
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