One of the first things you learn when you approach filing for bankruptcy is that it’s not a magic wand. Though it can eliminate a good portion of your debts, doing so comes at a significant cost in terms of your credit rating, and possibly even some of your most treasured assets. It also doesn’t eliminate every debt you’ve accumulated over the years.

While credit card debts and medical bills can certainly be wiped away, other obligations are not dischargeable. You will still have to pay for child support and alimony, student loans, and any compensation that you owe as a result of wrongdoing or malfeasance. These can include fraudulent or reckless acts, or debts assigned as a result of a civil action for personal injury.

Tax debt is an area that is not as clear-cut as other non-dischargeable debt. While some taxes cannot be discharged by bankruptcy, others can. Unpaid federal and state income taxes can be discharged under certain circumstances, while back payroll taxes like withholding for Medicare or Social Security can’t. You also can’t discharge income tax debt that is relatively new. If you haven’t paid your income taxes for the last few years, you will still need to pay them, but if you have income tax debt that is three years old or older and you have filed a valid tax return at least two years before filing for bankruptcy, then that debt can be included in your bankruptcy filing — though even that has qualifications. Your old tax debt must either have been assessed by the IRS at least 240 days prior to your bankruptcy filing or not yet assessed by them at all.

All of the above criteria fall away if your tax debt is a result of fraud. You cannot discharge income tax debt that resulted from trying to fool the government as to how much you owed.  And there’s one more important caveat to the rules surrounding bankruptcy discharge of tax debt: if the government has already assessed a lien on your assets connected to your debts, it’s too late. A bankruptcy filing cannot shut down a tax lien once it’s begun.

What this means to you will depend upon the specifics of your situation. For guidance on the best path out of your debt, contact our experienced attorneys today.