William G. Schwab and Associates
811 Blakeslee Blvd. Dr. East (PA Route 443) PO Box 56 Lehighton, PA 18235
Tel 610-377-5200 Fax 610-377-5209
NEWSLETTER
Bankruptcy August 2, 2015
 
Personal Injury
Bankruptcy
Business
Criminal Law
Elder Law
Estate Planning/Probate
Real Estate
 

Limiting the New Value Exception to Open Market Auctions Under LaSalle

In the 1999 case, Bank of America National Trust and Savings Association (LaSalle), the U.S. Supreme Court issued a landmark ...(more)

 

When the Bankruptcy Court Will Order the Appointment of a Trustee

In order to facilitate effective business reorganizations, Chapter 11 bankruptcy is designed to grant a failing business the opportunity to ...(more)

 

Income from Debt Cancellation

When you obtain bankruptcy relief, you are essentially receiving a financial benefit, because most, if not all, of your debts ...(more)

 

The Effect of Bankruptcy on Utility Services

Filing for bankruptcy automatically triggers the "automatic stay," which generally prevents creditors from pursuing claims against debtors to collect on ...(more)

 

Bankruptcy Law In The News

Former NFL Quarterback Vince Young Files For Bankruptcy

Central California Diocese Files for Bankruptcy

Duke Energy settles suit over Crescent bankruptcy

Detroit water department mediation to continue next week

Detroit bankruptcy plan threatens survivor benefits of families of fallen cops, firefighters

Are Income Taxes Dischargeable?


Government income taxes may or not be dischargeable under a Chapter 7 (liquidation) bankruptcy. Income taxes are usually considered "priority unsecured debts," and have a higher need to be paid over other unsecured debts such as doctor's bills or credit card accounts.

However, under certain circumstances, income taxes may be dischargeable.

A 3-Year Lapse
For income taxes to be dischargeable, 3 years must lapse from the date the taxes were last due, including extensions. This due date is calculated from the date the debtor's tax return is filed. Also, taxes assessed by the IRS are dischargeable if they were assessed 240 days (approximately 8 months) before the bankruptcy petition is filed.

Late Filing Doesn't Count
Filing a late income tax return, or failing to file, will not trigger the beginning of this 3-year period, and the debtor may end up filing for bankruptcy too early, and, accordingly, will not be able to discharge the overdue tax.

Furthermore, if there are problems with your taxes, such as fraud or willful evasion, the IRS may oppose any attempt by to you to discharge the tax debt. Also, any income taxes assessed after you file your bankruptcy petition are not dischargeable.

Exceptions
Certain taxes are not dischargeable in bankruptcy. These taxes include:

  • Property taxes
  • Federal tax liens that are already attached to your property
  • Certain excise taxes

Evaluate Your Situation
It is important to evaluate your tax situation before you file for bankruptcy relief. It is advisable to discuss your tax history and liability with a tax or bankruptcy professional before making a final decision.

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