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Can Colorado residents discharge tax debt through bankruptcy?

On Behalf of | Oct 31, 2018 | Chapter 7 and Chapter 13 Bankruptcy, Firm News | 0 comments

When Colorado residents are struggling under unsurmountable debt, they may feel lost and hopeless. However, they do have options, and one of these options may be filing for Chapter 7 or Chapter 13 bankruptcy. A bankruptcy filing can discharge many unsecured debts, such as credit card debt. However, not all unsecured debts can be satisfied through the bankruptcy process.

In general, certain tax debts cannot be discharged through a Chapter 7 bankruptcy filing. However, as is often the situation in life, there are limited exceptions. Tax debt may be discharged through a Chapter 7 bankruptcy filing if the following elements are fulfilled.

First, the taxes must be income taxes. The debtor must not have willfully evaded paying taxes and must not have committed any fraudulent acts regarding the taxes. The tax debt the debtor is seeking to discharge must be at least three years old. All necessary tax returns must have been filed. Finally, the Internal Revenue Service must have assessed the tax debt at least 240 days prior to the date the bankruptcy petition was filed, or the tax debt must not have been assessed yet.

As this shows, while tax debt generally cannot be discharged through Chapter 7 bankruptcy, there are limited circumstances in which it is possible. Determining whether you fall under these exceptions can be difficult, however, and any mistakes made in your bankruptcy filing could have negative consequences. Those who have questions about discharging tax debt through bankruptcy will want to get the right bankruptcy law information so that they can determine whether this is an option for them.