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Can taxes be discharged in a Chapter 7 bankruptcy? Maybe

On Behalf of | Dec 8, 2016 | Chapter 7 Bankruptcy, Firm News

It would be a challenge to find a Florida resident who wants to pay taxes, and it can be nearly impossible when your financial situation is dire. You might have been told that taxes cannot be discharged in a Chapter 7 bankruptcy, but that is not entirely true. Under certain circumstances, some tax obligations can be eliminated through the process.

Four criteria must be met in order to discharge a tax obligation. The first and second requirements are that the taxes must be at least three years old and assessed no fewer than 240 days prior to filing. Third, you must have filed the tax returns associated with the debt at least two years ago. Finally, the court cannot find any evidence of tax fraud or tax evasion on your part.

Even if your back taxes meet these obligations, there are numerous exceptions that could prevent them from being discharged. However, that does not mean that there are no other options. It might be possible to negotiate a lower interest rate and the elimination of penalties during the bankruptcy. If successful, these efforts might help you pay off your taxes.

There could be options that you are unaware of that might give you the ability to move toward a better financial future. Many people file for Chapter 7 bankruptcy due to their financial circumstances, but it should be noted that more taxes can be discharged through a Chapter 13. Under any circumstances, it would be a good idea to discuss your situation with a Florida bankruptcy attorney prior to making any firm decisions about how to proceed.

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