The treatment of taxes in bankruptcy depends on the type of bankruptcy you file and the type of tax debt you have.
Chapter 13 bankruptcy: In Chapter 13 bankruptcy, most tax debts can be included in the 3-5 year repayment plan, along with other debts. This allows you to catch up on past-due taxes and pay them off over time, without fear of wage garnishments or other collection actions by the government. Additionally, in some cases, you may be able to discharge certain tax debts in Chapter 13 if they meet certain criteria, such as being more than three years old and having been properly filed.
Chapter 7 bankruptcy: In Chapter 7 bankruptcy, most tax debts are not dischargeable and must be paid in full. However, if the tax debt meets certain criteria, such as being more than three years old and having been properly filed, it may be dischargeable. Additionally, filing for Chapter 7 bankruptcy can provide temporary relief from wage garnishments and other collection actions by the government.
It’s important to note that bankruptcy laws regarding taxes can be complex, and it’s important to consult with a bankruptcy attorney to determine the best course of action for your specific financial situation and tax debt. The attorney can help you understand your options and develop a strategy for resolving your tax debt in the most favorable way possible.