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Many types of taxes cannot be discharged in bankruptcy, including non-income tax debts. However, there are some exceptions for tax debt that meet certain qualifications.
A bankruptcy discharge is a court order that releases an individual or business from specific debts and obligations they owe to creditors. In other words, it's a legal process that eliminates the debtor's liability to pay certain types of debts they owe before filing the bankruptcy case.
Chapter 7 bankruptcy involves discharging debt through liquidation. ... Back taxes: If you discharge all your debts but still have back taxes that weren’t dischargeable, ...
Non-dischargeable debts: Not all debts are dischargeable through Chapter 13. For example, student loans, certain tax obligations and domestic support arrears generally remain your responsibility ...
A bankruptcy cannot be discharged until this document has been lodged. Ordinarily, a bankruptcy lasts three years from the filing of the Statement of Affairs with AFSA. [23] A Bankruptcy Trustee (in most cases, the Official Trustee at AFSA) is appointed to deal with all matters regarding the administration of the bankrupt estate.
Common exceptions to discharge include child support, income taxes less than three years old, property taxes, student loans (unless the debtor prevails in a difficult-to-win adversary proceeding brought to determine the dischargeability of the student loan), and fines and restitution imposed by a court for any crimes committed by the debtor.
For federal income tax purposes, the bankruptcy estate of an individual in a Chapter 7 or 11 case is a separate taxable entity from the debtor. [14] The bankruptcy estate of a corporation, partnership, or other collective entity, or the estate of an individual in Chapters 12 or 13, is not a separate taxable entity from the debtor. [15]
Key takeaways. There are two common types of bankruptcy: Chapter 7 and Chapter 13. Filing for bankruptcy is a time-consuming process that can take years to stop affecting your finances.