IRS Debt in Bankruptcy

On Behalf of | Oct 7, 2010 | Bankruptcy |

Most of the time the IRS debt is not dischargeable in bankruptcy.  There are exceptions to that general rule, however.  If all the prior years’ tax returns are on file, the taxes are income taxes, the taxes are three years old, and there is no equitable lien filed by the IRS then an adversarial proceeding may discharge the IRS debt in a Chapter 7 bankruptcy.  The taxes should also be discharged in a Chapter 13 bankruptcy.

However, if you do not fall within the exception to the general rule that the taxes are non-dischargeable then a Chapter 13 bankruptcy can help you to stop the penalties and interest that the IRS is assessing against your unpaid taxes.  Although the IRS is typically non-dischargeable, they are an unsecured creditor.  As such, they are not allowed to charge you interest in a Chapter 13 plan.

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