Will Bankruptcy Stop The IRS From Collecting Tax Debts?

Will a bankruptcy discharge include your IRS tax debts? It can certainly help!

When you file for bankruptcy, an automatic stay takes place, preventing your creditors from collecting on debts, including tax debts. This will, at least temporarily, prevent the IRS from collecting from you. However, the end result varies, depending on the type of bankruptcy filed.

Not all tax debts are able to be cleared through bankruptcy discharge. Older tax debts may qualify, but in most cases your IRS debts are considered priority debts.

A bankruptcy discharge under a Chapter 7 bankruptcy filing will likely not give you any relief from the IRS, permanently. This type of bankruptcy discharge does not deal with priority debts. However, clearing your other dischargeable debts may free up the financial space you need to pay off the IRS.

A Chapter 13 bankruptcy filing creates a repayment plan, under which your priority tax debts are paid. As penalties and interest accrued up to the date of filing are not considered a priority claim, filing a Chapter 13 bankruptcy can save you money.  The bankruptcy stay on proceedings will prevent the IRS from further pursuing you outside of the bankruptcy claim.

Bankruptcy exemptions and rules vary depending on your personal situation, the types of debts you have, and the type of bankruptcy you are filing. This is why it is so important to receive representation and assistance from a qualified lawyer, who can talk to you about the bankruptcy exemptions and options that apply specifically to you. While you may think you cannot deal with your tax debt through bankruptcy, an attorney could show you otherwise, if your financial situation meets certain criteria.

Simply put, the IRS will not be able to immediately collect on your tax debts no matter what type of bankruptcy you pursue, but if you are looking for more permanent relief, it is all dependent on a wide variety of factors. Talk to your attorney about how you can alleviate pressure from the IRS, and whether or not you can fully wipe out that tax debt through bankruptcy discharge.

It is a good idea to talk to an attorney before you are dealing with larger issues like IRS levies. If your finances are starting to crumble, look for a bankruptcy attorney right away so you can take the best steps.


This blog is intended as a general discussion of legal issues and not as a statement of fact, legal advice or a legal opinion. No attorney-client relationship is created by this blog. Do not act or rely upon law-related information in this communication without seeking the advice of an attorney licensed to practice in the relevant area.

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