Filing for Chapter 7 When You Have Tax Debt

If you are filing for Chapter 7 bankruptcy to erase your federal income taxes, beware: you must qualify under four stipulations in order to have your tax debts discharged.

First, the taxes must be income taxes only. Other taxes including fraud penalties, payroll taxes or Trust Fund Recovery Penalty taxes are not eligible for dismissal in a bankruptcy case.

Second, you must not have been found guilty of filing fraudulently to avoid paying additional taxes.

Third, you must have filed these taxes at least two years prior to filing for divorce. If the IRS filed a substitute return for you, this does not qualify and the taxes will not be removed.

Finally, the debt must have been assessed by the IRS at least 240 days prior to filing your bankruptcy petition.

Still have questions about tax debt and Chapter 7 bankruptcy? If so, contact a Chicago Chapter 7 bankruptcy lawyer from our firm now to get answers. Our Chicago bankruptcy attorneys have helped many people in the state of Illinois. We can help you, too!