Discharging Debts

Will Bankruptcy Erase IRS Debt?

We often hear questions about what kinds of debt bankruptcy can eliminate. One big lender for many Americas is the IRS. Fail to pay your taxes for a couple of years, and you can end up owing the IRS thousands of dollars or more.

Government Debt in Bankruptcy

Debt owed to the IRS falls into a general category of debt owed to the government. Generally, most debts owed to the government will not be discharged during bankruptcy. But every situation is different. Run down your debts with your attorney to get specific answers, but there are a few examples that we can give.

  • IRS Debt – if you owe back taxes, you’ll need to ask your attorney how that debt will be classified during your bankruptcy. In most cases, you’ll still owe those taxes after your bankruptcy, but you may be able to setup a payment plan. There are some rare situations where you may have these debts excused.
  • Other Taxes – taxes in general are the most likely type of debt you’d owe to the government. For any types of taxes you owe, look up how old each debt is and the last time you were contacted about it. Your attorney can help you figure out how each debt will be treated during your bankruptcy.
  • Unemployment – in some situations you may have to repay some unemployment if the government over pays you. Those debts may or may not be excused during a bankruptcy, based on how old they are and whether they are actively being collected.

On top of these types of taxes, there are state taxes. The treatment of those debts may vary by state, and a local attorney is your best source of information.

Back Taxes in Bankruptcy

Give the complexity of working with the government on these debts, your best bet is to take a free consultation with an attorney to see where you stand. You can get the most out of that consultation by being prepared!

Gather up all of your debts, including money owed to the IRS or any other government agency, and write down the amount owed. Also note who the debt is owed to, the date that the debt was due, and the last time you were contacted about that debt.

Having all of that information on hand will help you get through all of your debts quickly and get information specific to your situation.