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Can taxes be erased (discharged) in bankruptcy? Yes, under certain circumstances. Income Taxes. Income taxes are dischargeable in bankruptcy. Generally, in order to be dischargeable, income taxes must have been last due more than three years from the filing of the bankruptcy. Exactly how much more than 3 years, if any, depends on whether the tax return was filed on time, whether there were any additional assessments, whether there are extensions of time, whether an offer in compromise was filed and other issues. Federal Tax Liens. Federal tax liens are not dischargeable and can complicate the tax dischargeability analysis. On rare occasions, federal tax liens can be removed from homesteads. We have been successful in removing a Federal Tax lien from a homestead. Employment Taxes. The withholding portion of employment taxes is not dischargeable. The withholding portion of FICA taxes is approximately 2/3 of the original amount due. |
Property Taxes. The dischargeability of property taxes is generally irrelevant because property taxes prime all other encumbrances on real estate. So, they are normally always paid, either by a mortgage company or through foreclosure. Property taxes can be paid off gradually through a Chapter 13. Dealing with non-dischargeable taxes. Non-dischargeable taxes can be paid out through a reorganization type bankruptcy. Reorganization type bankruptcies are Chapter 11 bankruptcies and Chapter 13 bankruptcies. |
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