If your debt situation has become unmanageable, you may be considering a chapter 7 bankruptcy. The debt load borne by a given consumer may be made up of several different debts, but many are burdened with credit card debt, medical bills, and tax debts. It's widely known that you cannot get your tax debts discharged with a chapter 7 bankruptcy filing, but that information is not entirely accurate. Read on to find out more about how bankruptcy treats the money you owe to Uncle Sam.

Taxes and bankruptcy

Taxes, in certain situations, can be included and forgiven with a chapter 7 filing. There are numerous conditions and provisions attached to this issue and it can easily be too confusing for all but tax and law experts to fully understand. This summary may help but should not substitute for a consultation with your bankruptcy lawyer, since everyone's tax situation is unique.

Bankruptcy controls your debts and assets

When you file a bankruptcy, you are handing your finances over to the federal bankruptcy court in charge of your case. You are no longer in charge of who gets paid or even your assets, since a chapter 7 filing allows the court to seize property and sell it to help pay your creditors. In this manner, a filing that contains tax debts will prompt the bankruptcy trustee to assign your debts a priority and tax debts are known as "priority" debts. These debts are paid first if any property can be sold.

The age of the tax debt

The date and tax year of the return are used in addition to other factors in determining whether or not the tax debt is dischargeable. The tax debt must meet all of these conditions to be considered for forgiveness.

1. The tax debt itself must be more than three years old as determined by the due date for filing that return. If you filed for an extension for that year then you must move the date forward by 6 months (the time allowed for extensions).

2. The return that contained the debt must have been filed at least two years ago prior to your bankruptcy filing.

3. Any tax assessments should be at least 240 days old. An assessment is the date you are billed for taxes owed after you file a return or an audit was conducted.

4. There are no issues with the tax return being either fraudulent or with the filer being guilty of tax evasion.

5. There must be a return filed for the year that the tax debt is owed. Failing to file a return means that you cannot have that debt discharged.

Speak to bankruptcy attorney services about your tax debt situation as soon as possible to find out what can and what may not be forgiven with a filing.