subject: Can Bankruptcy Eliminate Irs Debt? [print this page] I have noticed as a practicing Orlando bankruptcy attorney, that people have a greater fear of IRS debt than any other type of debt. In many cases, that fear is completely justified, since as a government agency, the IRS has some special powers that other collectors do not. This does not mean however, that debt relief from money owed to the IRS is not attainable. There are circumstances that allow people to get relief from their IRS debt by filing a Chapter 7 or Chapter 13 bankruptcy.
Not all IRS debt is dischargeable in bankruptcy. However, with the help of an experienced Orlando bankruptcy attorney, it is possible to achieve the debt relief you seek when dealing with the IRS. Basically, it comes down to timing and meeting 5 general requirements.
1. The 3 Year Rule
When you file your tax return, the taxes for that year are generally due on April 15th of the following year. This date changes if you file for an extension, or simply file your return late. When it comes to eliminating IRS debt, three years must pass from the due date in question.
2. The 2 Year Rule
A tax return has been filed or given by the taxpayer for the tax year(s) in question at least more than two years preceding the filing date of the bankruptcy.
3. The 240 Day Rule
The tax claim was assessed at least more than 240 days preceding the filing date of the case.
4. Non-Fraudulent Return
Fraud was not present in the tax return in question.
5. No Willful Tax Evasion
The IRS has not determined that the taxpayer's aim was to evade or defeat the taxes.
Please note, these requirements for IRS debt elimination in bankruptcy are very basic. With each factor are potential hazards that, with the help of an experienced Orlando bankruptcy attorney, you will be able avoid.
I advise my Orlando bankruptcy clients wishing to eliminate IRS debts when filing bankruptcy that a separate Adversary Proceeding should be filed in addition to their normal bankruptcy case. I recommend this, to ensure the debt is in fact discharged along with the other debts in the case. With a separate Order stating the IRS debt has been discharged, there is no question that the debt has been eliminated in the bankruptcy.
You can achieve IRS debt relief by filing bankruptcy. You may be able to eliminate most, if not all, of the debt you owe to the IRS through bankruptcy, depending on when you file your case and how old the IRS debt is.
