Lefkovitz & Lefkovitz

Nashville Office 615-256-8300       Cookeville Office 931-400-2218

Nashville Office 615-256-8300
Cookeville Office 931-400-2218

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How tax debt is treated in bankruptcy

On Behalf of | Apr 16, 2018 | Chapter 7 |

The rules associated with filing for bankruptcy in Tennessee can be complicated. For example, a tax debt can be discharged in a bankruptcy under certain circumstances. However, this depends on the type of taxes owed, the priority the debt is given and how old the debt is. As a general rule, a person cannot discharge tax debt if it is in an effort to evade taxes owed.

To be eligible for discharge, the debt must have been assessed 240 or more days prior to filing for bankruptcy. Furthermore, the return must have been filed at least two years prior to bankruptcy, and the debt itself must be at least three years old when filing for bankruptcy. Bankruptcy generally won’t discharge a tax obligation if the debt is associated with a tax return that’s fraudulent or frivolous.

There are many variables that could come into play in a given bankruptcy case. Cases can be even more complicated when a person is looking to have a back tax balance discharged. However, a bankruptcy attorney could help a client better understand the specifics of his or her case. Different rules can apply depending on whether a debtor files for Chapter 7 or Chapter 13.

Those who are seeking debt relief may obtain it by filing for bankruptcy. A variety of debts such as credit card, medical and past tax balances could be discharged in a Chapter 7 case. If a person doesn’t qualify for Chapter 7 bankruptcy, relief may be obtained in a Chapter 13 filing. Regardless of what type of bankruptcy a debtor files for, it may be possible to obtain a stay of creditor lawsuits or other collection activities.

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