Historically tax debt was exempt and could rarely if ever be discharged as part of a bankruptcy case regardless of filing chapter 7 or 13.  Bankruptcy laws have recently changed and will now allow tax debt to be eliminated.  This could be life changing news to many Americans that currently owe back taxes.

The new bankruptcy laws treat tax debt the same under chapter 7 and chapter 13 cases. Chapter 7 allows you to totally discharge all qualifying debt completely; whereas Chapter 13 establishes a payment plan to repay many of your debts over time.

As exciting as these new laws are, there are restrictions and very specific requirements that must be met before your tax debt can be discharged.

Here is a list of the main criteria your tax debt must meet in order to be eliminated in bankruptcy:

1.    The actual due date for filing the return in question must be at least three years ago.  Simply put, the tax debt that you are trying to get discharged must be related to a tax return that was due at least three years before the date you file for bankruptcy.

2.    The return must have been filed with the IRS at least two years ago This means that the tax return that caused the debt must have actually been filed at least two years prior to the date you file for bankruptcy.  (this means even if you filed the return late your debt could still be discharged)

3.    The tax debt must have been assessed at least 240 days ago The tax debt has to have been recognized by the IRS either because you reported the balance due or an IRS final determination in an audit occurred at least 240 days before the date you file for bankruptcy.  (or an IRS assessment became final at least 240 days ago)

4.    The original tax return must not have been fraudulent The tax return in question must not be fraudulent or frivolous in any way.

5.    The taxpayer must not be guilty of tax evasion You must not be guilty of evading the tax laws intentionally.
If your tax debt meets the above list of criteria, there is a high likelihood that your bankruptcy will eliminate your tax debt.

You do need to work with your bankruptcy attorney to verify that your tax debt meets all requirements and criteria and that all paperwork is completed accurately.