Laws on Bankruptcy Fraud
  • May 8, 2017
  • admin
  • 0

Filing bankruptcy can help you get rid of your debt. To successfully pursue this course of action, you must first understand how bankruptcy works. Many people do not know that filing bankruptcy can help them discharge their tax debts, in addition to regular debts such as a credit card debt. Your debts must, however, meet certain criteria before you qualify to wipe them off through Chapter 7 Bankruptcy. Also, note you cannot discharge all of your tax debts by filing bankruptcy. To help you in understanding how bankruptcy works, let’s discuss some of the facts regarding Chapter 7 bankruptcy in this brief post.

When Can you Discharge Tax Debts?

There are more than a few requirements for a taxpayer to be able to discharge their tax debts in Chapter 7 Bankruptcy. These include:

Debt must be at least three years old

The tax debt must be due (including all valid extensions) at least 3 years before you filed for bankruptcy. So, if you disclosed the taxes in your 2009 tax return form and the extension to file the return expired in 2010, the tax will qualify for a discharge if you file bankruptcy in 2013.

You filed the return two years back

You must have filed a return for the tax debt you wish to discharge at least two years before filing for bankruptcy. Most courts do not regard a late return as a “return”, which may stop you getting your taxes wiped off. If you meet the other criterion, however, some courts may allow you to discharge the tax debt for which you filed the late return.

The tax debt must have been assessed 240 days back

The IRS must have assessed the tax debt to be discharged 240 days before you file for bankruptcy. The IRS may extend this limit if they signed an “offer in compromise” agreement with you, or you filed for a bankruptcy earlier.

You must not commit any fraud or willful evasion

The IRS must not find any evidence proving that you willfully committed fraud such as using a different social security number to evade paying your taxes.

Must Read: 4 Signs to Help You Avoid IRS Debt Tax Relief Scams?

Which Tax Debts Cannot be Discharged?

Individuals filing for Chapter 7 Bankruptcy cannot discharge most non-income related tax debts. These include:

Property Taxes

Individuals with any property tax they incurred within one year of filing bankruptcy cannot discharge the debt. You can, however, discharge any property tax that is older than a year from when you filed for bankruptcy.

Tax Lien

Although you owe no personal tax obligations and can stop the IRS from garnishing your bank account and wages – when you file for a Chapter 7 Bankruptcy – this does not free you from tax liens. Any tax liens recorded before you filed for bankruptcy remain on your property, which means you will have to pay the liens after you sell the property.

Must Read: IRS Tax Lien Assistance


Chapter 7 Bankruptcy cannot help you wipe off “trust fund” taxes such as Medicare, FICA, and any income tax that your employee is required to withhold from your paycheck. You also cannot discharge certain excise taxes, custom duties, and employment taxes.


Although filing Chapter 7 Bankruptcy can help you discharge your debts, including tax debts, the law has a number of clauses and subclauses you must consider. If you take the wrong steps such as misrepresenting information on your tax return to evade paying taxes, you may end up with penalties for bankruptcy fraud. Nick Nemeth at The Law Offices of Nick Nemeth can help you in understanding how bankruptcy works and provide you with detailed information on whether filing bankruptcy would be an ideal option for you to get rid of your IRS debt. To schedule a free no-obligation consultation please call us at (972) 426-2553, or fill out our contact form.

Please follow and like us:

What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
The Nemeth Law team is exceptional. They treat their clients like a family member who is in crisis. They want you to get the best possible outcome. I really appreciate everything that they did for me. Jake and Ashley had the greatest role in my case and it all turned out for the best for me. Thank you Nick and team for easing my fears and getting me through the long process. I'm truly grateful.
Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
Quick Inquiry


    Enter the text you see above