A debtor's ability to discharge any tax debt in bankruptcy is based on the classification of the debt. The types of tax claims are:
In a liquidation or Chapter 7 proceeding, the tax debts are discharged by the court along with all other debts.
In a reorganization of debts or Chapter 13 proceeding, only certain tax debts may be discharged but other advantages exist. A debtor may receive a discharge for tax liabilities related to unpaid debts even if the taxes have not been paid. Furthermore, under Chapter 13 reorganization, creditors holding priority tax claims must file and prove that their claims are valid and unpaid. If a filing or proof is not made, then the debtor will be discharged of those debts.
Not all tax debts can be discharged. Specifically, secured claims and trust fund taxes cannot be discharged.
Yes, three circumstances exist where claims will be considered nondischargeable. They are:
Declaring bankruptcy is very stressful and discharging tax debts may be a huge relief. If you have any questions or would like to know more, consult an experienced tax or bankruptcy attorney.
Last Modified: 02-13-2014 10:24 AM PSTLaw Library Disclaimer
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