Southern California Bankruptcy Attorneys
Orange County — Los Angeles County — Long Beach, California
There are certain taxes owed to the State of California Franchise Tax Board and/or Internal Revenue Service that can be discharged (eliminated) in bankruptcy. This is determined by specific dates – when the return should have been filed, the date of assessment, and the date you actually filed. Also taken into consideration is whether you attempted to evade payment of the tax by fraud.
Considering bankruptcy is helpful especially if it has been more than three years since your returns were due to be filed.
Discharge - The most common reason for bankruptcy cases is to discharge the obligation to pay your debts. Different types of debts are dischargeable in different types of bankruptcy. A good bankruptcy attorney can explain which debts are dischargeable in which chapter of bankruptcy: Chapter 7, Chapter 11, or Chapter 13.
The Bankruptcy Code allows the debtor’s personal liability to be eliminated. The filing of the debtor’s bankruptcy case invokes the automatic stay, which stops collection proceedings and any type of communications (letters, telephone calls, personal contact) with the creditors In a Chapter 7 bankruptcy, a debtor will usually receive a discharge within 4-6 months of filing, eliminating their unsecured debts. In a Chapter 13 bankruptcy, a debtor will usually receive a discharge after completing a 36 to 60 month repayment plan, in which they pay back between 0% and 100% of their unsecured debt, depending on their income and expenses. . Bankruptcy issues are very complicated; a bankruptcy attorney can analyze your situation and help you plan for a fresh start.
Tax Obligations - There are factors that are considered before a Federal or State tax obligation can be discharged under Chapters 7 or 13.
Priority Taxes
Priority tax debts are not dischargeable and must be paid back. Typically, a priority tax is:
- LESS THAN THREE YEARS OLD. The debt is owed for a tax year in which a return is supposed to be filed within the three years prior to the bankruptcy case being filed
- ASSESSED WITHIN 240 DAYS OF THE BANKRUPTCY. The tax was assessed within 240 days prior to the filing of the bankruptcy case
Dischargeable Taxes
In Chapter 7 – More than three years have passed since your returns were due, they were filed in a timely fashion, they were filed at least two years ago, , there was no fraud involved, and the taxes were not assessed in the last 240 days
In Chapter 13 – It is more than three years since your returns were due, they were filed at least two years ago in a timely fashion, they have not been assessed in the last240 days, , and fraud was not involved in the tax filing the. If the tax debt in question meets the above requirements, then you may be able to discharge whatever amount of the unsecured tax debt remains when you complete your Chapter 13 repayment plan and get a discharge of your remaining unsecured debts.
Tax Liens - Tax liens on your property will stay with your property and survive bankruptcy. If, and when, you sell the property, any extra money will pay off the lien.
Discharging taxes is a very complicated and complex issue. The information provided here is general in nature and should not construed as legal advice. A knowledgeable attorney can assess your specific situation and put you on the correct road to recovery. If you owe taxes and are considering filing for bankruptcy, please contact a qualified bankruptcy attorney as soon as possible. For further information on California taxes, visit the California Tax Service Center at http://www.taxes.ca.gov/
