Chapter 13 bankruptcy and tax debt
Under the new bankruptcy laws, tax debt is treated the same way for both Chapter 13 and Chapter 7 bankruptcy.
In order for a tax debt to be discharged under Chapter 13 bankruptcy, five specific criteria must be met:
- The tax return was due at least three years ago: The due date for the return must be at least three years before the bankruptcy petition was filed.
- The tax return was filed at least two years ago: The return must have been filed a minimum of two years before the bankruptcy petition was filed.
- The tax assessment is at least 240 days old: The IRS must have assessed the tax a minimum of 240 days before the bankruptcy petition was filed.
- The tax return was not fraudulent: The return must not be frivolous or fraudulent.
- The tax payer did not commit tax evasion: The bankruptcy petitioner must not be guilty of evading tax laws.
Note also that before a Chapter 13 bankruptcy will be granted, the petitioner must prove that they filed their four previous tax returns with the IRS. The petitioner must also provide the bankruptcy court with a copy of their last tax return.