Can I Eliminate My Tax Debt In a Chapter 7 Bankruptcy?
In both Oregon and Washington, you can get rid of any tax debt in a chapter 7 bankruptcy provided that all of the following conditions are fulfilled:
1. The tax debt is not owed due to wilfull evasion or fraud. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, you will not be able to discharge the debt in bankruptcy;
2. The taxes are actually income taxes. Fraud penalties and payroll taxes cannot be discharged in bankruptcy.
3. The tax return must have been originally due at least three years prior to your Chapter 7 bankruptcy filing
4. You actually filed a tax return for the debt you want to get rid of at least two years before filing for bankruptcy.
5. The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition.
Warning: Even If your taxes can be eliminate in a Chapter 7 bankruptcy case, bankruptcy will not destroy tax liens. If the IRS recorded a tax lien on your property before you file for bankruptcy, the lien will remain on the property. This means that if you ever want to sell your house, you’ll have to pay off the tax lien in order to do so.