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Let’s talk about one of the biggest myths out there:
“You can’t get rid of tax debt in bankruptcy.”
Not true.
While it’s not always easy—and not all tax debt goes away—some tax debt absolutely can be discharged through bankruptcy. The key is knowing which kind, and when.
Here’s what you need to know in plain English:
First, the Basics: Chapter 7 vs. Chapter 13
If you’re thinking about bankruptcy, you’re likely looking at Chapter 7 or Chapter 13:
- Chapter 7 wipes out qualifying debts quickly (usually within a few months).
- Chapter 13 sets up a payment plan over 3–5 years, which can help manage debts you can’t discharge.
Both can help with tax debt—but in different ways.
Can Tax Debt Be Erased in Chapter 7? Sometimes.
Here’s the deal: income tax debt can be wiped out in Chapter 7 if it meets all of these conditions:
- It’s income tax (not payroll or fraud-related taxes)
Only federal or state income tax may qualify. - It’s at least 3 years old
The tax return was due at least three years before you file. - You filed the return at least 2 years ago
You must have actually filed the tax return—not the IRS filing one for you. - The IRS assessed the tax at least 240 days ago
- There’s no fraud or tax evasion involved
Honest mistakes? Okay. Intentionally hiding income? Not so much.
If all of these are true, that tax debt may go away completely in Chapter 7.
What About Chapter 13?
Even if your tax debt doesn’t qualify for discharge, Chapter 13 can still help. It allows you to:
- Pay back priority tax debts over time (often with no penalties or additional interest)
- Avoid wage garnishment or aggressive IRS collections
- Stay protected under the court’s automatic stay
In many cases, it gives you the time and space to catch up without digging yourself deeper.
Other Tax-Related Debts (That Don’t Go Away)
Some debts don’t go anywhere, even in bankruptcy:
- Payroll taxes (if you own a business)
- Fraud penalties
- Tax liens (you may still owe even if the debt is discharged, especially if the IRS filed a lien beforehand)
That’s why it’s crucial to have a strategy—and someone who knows how to build one.
Bottom Line: Don’t Guess. Ask.
Tax debt and bankruptcy are complicated, and every case is different. But one thing is true across the board: you’ve got options. You don’t have to stay buried in IRS letters, interest, and stress.
If tax debt is weighing you down, let’s talk. We’ll review your situation, figure out if bankruptcy makes sense, and help you move forward.
