Finance & Loans

How to handle personal taxes in a bankruptcy filing

When filing for bankruptcy, everyone wonder whether they can eliminate paying taxes owed. It is a complicated matter and usually depends on the type of tax and other circumstances. Here are some guidelines but always seek professional help.

In a Chapter 7 bankruptcy, in order to get a discharge of taxes:

• The tax return must have been first due at least three years before the bankruptcy filing;
• The tax cannot be assessed or assessable within the previous 240 days prior to the bankruptcy filing;
• In the case of late filed returns, return must have been filed two years prior to the bankruptcy filing;
• The tax return was not fraudulent; and
• The payer did not attempt to evade taxes owed.

If there is a lien on taxpayer’s real property, then the lean have to be paid at the time of the sale of the property.

In a Chapter 13 bankruptcy, the amount to be paid depends on the tax payer’s income and the budget proposed in the Plan that is submitted to the court.

Since payment of taxes owed in a bankruptcy is more complex, seek legal assistance from a professional before filing bankruptcy.