If your taxes first became due within 3 years of the date on which you filed for Chapter 7 bankruptcy and which were assessed within 240 days of the filing … you can’t wipe them out in Chapter 7 bankruptcy.
If you didn’t file your returns and they have not been assessed for that reason … you can’t wipe them out in Chapter 7 bankruptcy.
These are called priority taxes. And if you file a Chapter 7 bankruptcy, you’ll still owe the money at the end of the case.
If you’ve got priority tax debt then you may want to consider Chapter 13 bankruptcy. In Chapter 13 bankruptcy, priority taxes must be paid in full but you may be able to pay only a small portion of the penalties that accrued.
One benefit of filing Chapter 13 when you owe priority taxes? In Chapter 13 the tax does not continue to incur interest during the case; if the plan is completed, no post filing interest is due.
A few more tips:
If you didn’t file a return at all then the taxes that would otherwise be due can’t be discharged in bankruptcy – period.
If a return was filed late then it must have been on file for two years for the tax to be discharged in any kind of bankruptcy.
The moral of the story is to always file your tax returns. Even if you can’t pay when you file the return.
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