Legal Question in Bankruptcy in Maryland

Re: back taxes dischargable after a certain time

The question is not debt versus income, but debt versus DISPOSABLE income, and I doubt that under the present state of the law you would have a serious problem in Maryland, but it depends on your expenses. If the US Trustee does question your case under the "substantial abuse" standard of section 707 of the bankruptcy code (the only place that this comparison is relevant), you can convert to Chapter 13 and pay part of your debt, discharging the rest.

As for the taxes, 1993 and 1994 income taxes will be dischargeable in Chap. 7 if (1) honest returns were filed at least 2 years ago; and (2) no assessment was made within 240 days of filing. The other test, that the due date of the returns, including any extensions, was at least 3 years ago, does appear to have been met, absent extraordinary circumstances. In Ch. 13, the 2-year rule does not apply, only the 3-year and 240-day rules. Note that if the IRS has filed a tax lien, that lien remains in effect despite the bankruptcy as to any property you own at the time of filing.