Discharge of Tax Debt

Southfield Bankruptcy Attorneys Seeking Ideal Solutions

We at Goldstein Bershad and Fried, PC are frequently involved in seeking relief for our clients from federal, state, and city taxes. While tax payment installments can be set up with taxing authorities through Chapter 11 and Chapter 13 bankruptcies, often the simplest and least expensive solution is discharging the personal income or sales taxes in Chapter 7.

Can I discharge individual income tax?

Yes! Personal income tax liability, both state and federal, can be discharged in a bankruptcy if they were last due, including extensions, more than three years before the bankruptcy is filed AND the tax return was filed more than two years before the bankruptcy is filed.

Can I discharge business taxes?

Maybe! Individuals in control of a business can be personally liable for certain kinds of federal and state business-related tax even if the business is a corporation or limited liability company. Virtually all taxes except withholding tax can be discharged in a bankruptcy. To be discharged, the same two year and three-year rules described above will apply.

If the taxes cannot be discharged, you can still get help in the Bankruptcy Court. In Chapter 11 or Chapter 13 bankruptcy, you can make monthly payments to the taxing authorities over a period of years.

What are the tax advantages?

Tax debt is a large part of our business insolvency practice at Goldstein Bershad and Fried, PC, All taxes can be managed fairly effectively in bankruptcy:

• Chapter 11 installments: Chapter 11 installments can be a viable option. Unsecured taxes can be paid over five years from the date of the filing of the bankruptcy petition.
• Chapter 13 installments: In chapter 13, taxes may be paid over the life of the Plan - up to 5 years.
• Discharge taxes: Income taxes can be discharged if the returns were last due more than 3 years before the bankruptcy, and the returns were actually filed more than 2 years before the bankruptcy.