Tax Attorney in Raleigh, NC, Explains Whether Bankruptcy Can Clear Tax Debt

When facing overwhelming tax debt, many individuals wonder, “Does bankruptcy clear tax debt?” A tax attorney in Raleigh, NC, can help individuals navigate the complex intersection of tax law and bankruptcy proceedings for effective financial relief moving forward.

Understanding the specific circumstances under which bankruptcy may provide relief from tax obligations requires careful consideration of various factors. In this press release, Murray Moyer, PLLC, will explain whether bankruptcy can clear tax debt.

Does Bankruptcy Clear Tax Debt?

The answer to whether bankruptcy clears tax debt depends on several critical factors, including the type of bankruptcy filed and the nature of the tax debt itself. Murray Moyer, PLLC, understands that tax debt discharge through bankruptcy requires meeting specific eligibility requirements.

Chapter 7 bankruptcy provides potential relief through the complete discharge of qualifying debts. For tax debt to qualify for discharge under Chapter 7, it must meet several criteria:

• The tax debt must be income tax debt.

• The tax return was due at least three years before filing bankruptcy.

• The tax return was filed at least two years before the bankruptcy petition.

• The IRS assessed the tax at least 240 days before filing bankruptcy.

• The tax return cannot be fraudulent.

• The taxpayer did not willfully attempt to evade paying taxes.

But does bankruptcy clear tax debt discharge for those filing Chapter 13? Chapter 13 bankruptcy operates differently, creating a structured repayment plan over three to five years. Under Chapter 13:

• Priority tax obligations remain payable through the repayment plan.

• Some older tax debts may qualify for partial discharge.

• Tax liens remain enforceable even after bankruptcy.

• Interest and penalties may continue accruing.

While Chapter 7 can potentially eliminate qualifying tax debts completely after discharge, Chapter 13 focuses on creating manageable payment arrangements for tax obligations. This key difference makes Chapter 7 potentially more beneficial for older tax debts that meet discharge requirements, while Chapter 13 provides a structured approach to paying recent tax obligations over time.

Understanding Other Debts That Different Types of Bankruptcy Can Clear in Raleigh, NC

Does bankruptcy clear tax debt discharge? In many cases, it can, but bankruptcy court proceedings also address various types of debt beyond tax obligations. Understanding which debts qualify for discharge helps individuals make informed decisions about their financial future.

Chapter 7 bankruptcy commonly discharges:

• Credit card debt

• Medical bills

• Personal loans

• Utility bills

• Civil court judgments

• Business debts

Under Chapter 7 bankruptcy, the court appoints a trustee to oversee the liquidation of non-exempt assets to repay creditors. The entire process typically concludes within four to six months from filing.

Debtors must pass a means test to qualify, which examines their income against their state’s median income levels. After liquidation and distribution of assets, remaining qualifying debts are discharged, providing a fresh financial start.

Chapter 13 bankruptcy addresses:

• Mortgage arrears

• Car loan payments

• Recent tax debts

• Child support arrears

• Student loan hardship cases

Chapter 13 bankruptcy requires creating a structured repayment plan lasting three to five years, depending on the income level and total debt amount. The debtor retains their assets while making monthly payments to a court-appointed trustee, who distributes funds to creditors according to a predetermined priority order.

This option allows individuals to catch up on secured debt payments while protecting their assets from seizure. Upon successful completion of the repayment plan, remaining eligible debts are discharged.

Murray Moyer: Your Trusted Tax Advisors in Raleigh

Does bankruptcy clear tax debt? The answer requires careful evaluation of individual circumstances and timing considerations.

Murray Moyer, PLLC, helps Raleigh residents understand their options for tax debt relief through bankruptcy. Their team stays current with trends in accounting and taxation, providing comprehensive guidance on complex financial matters.

The firm offers decades of combined experience in tax law and bankruptcy matters. For assistance with tax debt concerns in Raleigh, NC, contact Murray Moyer, PLLC, at (919) 283-2308.

Contact Information:

Murray Moyer PLLC

4600 Marriott Drive, Suite 120
Raleigh, NC 27612
United States

Michael Murray
https://www.murraymoyer.com/