Legal Question in Bankruptcy in Maryland

Re: Are Tax Debt Discharable?

Depending upon what type of tax obligations you owe, they may be dischargeable in bankruptcy. The answer would depend upon when your taxes were technically "assessed". There is a period of time after which certain tax obligations may be discharged in bankruptcy. Whether a chapter 13 filing, or filing under another chapter (such as chpater 7) would be better is a question that would require specific examination of your facts. Also, it is possible that there are non-bankruptcy options for resolving your tax difficulties. Please feel free to give me a call and I will be happy to chat with you for a few minutes to point you in the right direction.

Lawrence R. Holzman

Joseph, Greenwald & Laake, P.A.

6404 Ivy Lane, Suite 400

Greenbelt, MD 20770

(301) 220-2200

fax (301) 220-1214

Disclaimer: Please note that the posting of this response is not intended to constitute legal advice. You should contact an attorney to obtain information applicable to your situation. This posting is not confidential or priviledged and does not create an attorney/client relationship.

Re: Are Tax Debt Discharable?

At a minimum, Chapter 13 would give you time to pay the tax debt in an orderly manner.

To figure out if it would help you beyond that, you need to understand the following basic principles:

- Priority debts must be paid in full in Chapter 13, but you can take up to 5 years to do it. Non-priority tax debt is treated as general unsecured debt and can be paid as little as 10% or less, depending on your circumstances. Secured tax debt (tax debt to which a tax lien attaches) has to be paid up to the value of the property securing it, or you have to surrender the property.

- Income tax debts are priority debts if (a) the due date of the return, including any applicable extensions, is over 3 years before filing the bankruptcy; or (b) the taxes were assessed withn 240 days of filing. Interest through the petition date is priority if the tax is priority. Penalties generally are all non-priority. Types of taxes other than income taxes are treated differently.

-All taxes are technically dischargeable in a 13, but the requirement that priority taxes be paid in full through the plan moots this unless the taxing authority forgets to file a claim. Non-priority taxes are dischargeable in a 13.

-In a Ch. 7, priority taxes are non-dischargeable. In addition, taxes for which no return has been filed, for which the return was less than 2 years pre-petition, or for which a fraudulent or evasive return was filed, are non-dischargeable. So in a 7, you have to meet all 3 tests (3 years from due date, 2 years from filing, and 240 days from assessment) to discharge the taxes.

We handle bankruptcies throughout DC, MD, and VA, and are particularly experienced with tax issues in bankruptcy. Feel free to contact us about this matter.