People sometimes assume that a bankruptcy filing is a panacea that will wipe out all debts permanently, including tax debts. In fact, this is not the case. The details will depend upon the form of bankruptcy that is filed and the type of tax payment that is delinquent.
A Chapter 7 bankruptcy can potentially result in a discharge of income tax debt if certain conditions are met. There are many rules, but the 3 primary rules are: 1) the tax year must be more than 3 years old at the time of the bankruptcy filing, 2) actual filing of the return has to have taken place in a timely manner, and the internal IRS or state assessment has to have been entered at least 240 days before the bankruptcy filing. If all of these conditions are met, the tax debts can usually be discharged.
In a chapter 13 reorganization bankruptcy priority debts will be paid first. An income tax delinquency will be a priority debt, so your repayment plan can be structured to pay the taxes back over time and avoid any tax garnishments. The other benefit is that we can usually eliminate all future interest and penalties while paying the taxes back through a chapter 13.
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Our firm serves people in many different cities throughout the states of Oregon and Washington. If you are in Tri-Cities, Vancouver, Eugene, Salem, Portland, Bend, Medford or any other community in the Oregon our southern Washington, we are just a phone call away. We offer free, no obligation bankruptcy case evaluations, and you can set up an appointment right now if you give us a call at 1-800-682-9568.
Can a Bankruptcy Wipe Out Income Tax Debt? in Portland OR and Salem OR
And all surrounding areas