Discharging Taxes in Bankruptcy

Many individuals filing Chapter 7 and Chapter 13 bankruptcy in Detroit Michigan have tax obligations. State and IRS Debt can be discharged in Chapter 7 & Chapter 13  bankruptcy filings if the debt/obligation  meets 5 conditions:

  1. More than three years Old.  This is measured 3 years from the date the tax obligation was due.    Taxes are usually due April 15.  So a  2011 tax obligation would be  due to the IRS  on April 15, 2012. That debt/obligation can be discharged after April 15, 2015 (3 years) if the debt meets the other 5 conditions for discharge.
  2. The taxes must have been filed for at least 2 years.  A tax return must have been file more than 2 years prior to an attempt to discharge the obligation/debt.
  3. There must be no assessments in the past 240 days prior to any attempt to discharge the debt/obligation.  You may have filed your taxes more than 2 years from the bankruptcy filing and the tax year may comply with rule 1, being due more than years prior to the BK filing, but if there have been any assessments by the IRS within 240 days the debt/obligaiton may not be dischargeable due to the assessmenht.
  4. The tax return must not have been deemed a fraudulent return by the IRS.
  5. There must have been no determination that there was a willful attempt to evade taxes.  Even if all the prior conditions are met, if there was a willful attempt to evade taxes involved in the filings the taxes will not be dischargeable.


The five conditions set out above generally can determine whether a tax obligation can be discharged in bankruptcy. For individuals with non-dischargeable tax obligations, a Chapter 13 bankruptcy can stop collection, levies, seizures and garnishments and allow the debtor to pay the non-dischargeable debt over 36 to 60 months (3-5 years) while protecting income and assets.

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