Bankruptcy Laws

Can State Income Tax be Discharged in Bankruptcy?

When you file for Chapter 7 bankruptcy, your state income tax can be discharged in the bankruptcy process if you meet all of the following conditions. Not all tax debts can be discharged even if you file for a Chapter 7 bankruptcy. However, some tax debt including state income tax debts can be wiped out completely by filing for bankruptcy. At the time of the filing, you must satisfy all of the followings.

No Fraud

The first for your state income tax to be discharged in bankruptcy is that you did not commit any fraud or willful evasion of the taxes. That includes not filing fraudulent tax returns with incorrect information aimed at confusing or hiding information from the state or the IRS.

How many year can tax be discharge for bankruptcy?

The 3 year rule

Not all taxes can be discharged even if they are income taxes. The only tax debt that can be discharged are related to unpaid taxes that are more than 3 years past due.

The 2 year rule

You filed the tax return that relates to the unpaid taxes at least 2 years before filing for bankruptcy.

The 240 day rule

The income tax debt was assessed at least 240 days before you file for bankruptcy or has not been assessed.

How long after the tax debt discharged will I be completely free?

180 days after the tax debt was discharged in the bankruptcy ruling, you can still be liable to pay some of the taxes. If you have an insurance policy, divorce proceedings or inheritance money within 180 days, you must inform the bankruptcy court of the money and you will have to use some of the money to pay for your taxes or other debts according to the bankruptcy court.

For free consultation regarding your tax debts, use the free consultation service.

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