The Quick Answer

You may have heard that you cannot wipe out taxes in bankruptcy. THAT IS NOT ALWAYS TRUE! Under certain conditions you may be able to wipe out taxes in bankruptcy.

The Long Answer

Generally speaking, if you can answer "yes" to each of the questions below then you may have a chance at wiping out some of your income taxes in chapter 7 bankruptcy:

Q1. The taxes you are hoping to wipe out are at least three years old.

Example: You want to wipe out 1993 taxes. You filed your 1993 taxes on April 15, 1994. You plan on filing your bankruptcy on May 1, 1997. Since you plan on filing you bankruptcy at least three years after you filed your 1993 taxes, then you may qualify to wipe out these taxes.

Q2. You did file your taxes on time, or at least two years before you file your bankruptcy petition.

If the government files your taxes for you because you failed to file them on your own, then you may not be able to wipe out your tax debt.

Q3. Your tax debt was not assessed within the last 8 months

An assessment is basically a determination of how much tax you owe. Sometimes it is called a "Notice of Tax Due."

Q4. You did not attempt to unlawfully evade paying your taxes

Past cases seem to show that as long as you file your tax returns, the court won't say you were trying to unlawfully evade paying your taxes.

Q5. The tax debt you owe has not become secured.

If the government filed a lien against you, and you own property, then the tax debt may be secured against this property. Thus, while you still own the property, the tax debt to the government still exists. And when you sell the property, the government will want to get repaid what you owe them.

Please note: If your case involves taxes it may be very tricky. You should talk to a qualified bankruptcy attorney about whether your taxes might be wiped out in a chapter 7 bankruptcy.