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Bankruptcy and back taxes

For many of those in Nashua who come to see us here at The Law Office of Paul Petrillo seeking bankruptcy protection, back taxes are among the largest debts that they may be dealing with. If you are being weighed down by excessive tax liabilities, you may have heard that not all tax debt is dischargeable through a Chapter 7 bankruptcy. This may deter you from wanting to seek bankruptcy protection, yet having a tax lien hanging over you can be even more burdensome.

The first thing to understand about bankruptcy and back taxes is only income tax qualifies for discharge. Even then, your tax liability must meet the rules established by the section 507(a)(8) of the U.S. Bankruptcy Code (as shared by the Legal Information Institute):

  •          Three years must have passed from the time that the return from which your liabilities were generated was filed with the Internal Revenue Service. This includes extensions.  
  •          You must have filed the return that yielded your back taxes at least two years prior to filing for bankruptcy.
  •          Either 240 days has passed from the time the IRS assessed the tax penalty against you to the date which you filed for bankruptcy, or no debt has been assessed yet at all.

The timing criteria detailed above can be extended through activities such as a prior bankruptcy filing or by submitting an offer in compromise to the IRS.

If it is believed that you have attempted to evade paying taxes through fraud, you cannot include tax debt in a bankruptcy. The same is true of any federal tax liens levied against your property prior to your bankruptcy filing date.

More information on settling your liabilities through a Chapter 7 bankruptcy can be found here on our site.  

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Law Office of Paul Petrillo
One Tara Boulevard
Suite 200
Nashua, NH 03062

Phone: 603-635-4149
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