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 July 28, 2014
 
Personal Injury
Bankruptcy
Business
Criminal Law
Elder Law
Estate Planning/Probate
Real Estate
 

Continuing Utility Services After Bankruptcy

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

 

Settling Credit and Debit Disputes with the FCBA and EFTA

The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) were enacted by Congress as a means to ...(more)

 

Discharging Debt Balance for Hardship Beyond Debtor's Control Under Chapter 13

Chapter 13 bankruptcy allows a debtor to reorganize debt according to a court-approved repayment plan, which provides for the scheduled ...(more)

 

Bankruptcy Effects on Certain Tax Obligations

When the debts of an individual or business entity exceed the fair market value of assets, one option is to ...(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

Income Tax Dischargeability


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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