Can Chapter 7 actually wipe out IRS tax debt?
A lot of taxpayers hear that bankruptcy can erase debt and assume IRS tax debt works the same way. It is more complicated than that.
Some older income tax debts may be dischargeable in Chapter 7, but only if the timing rules, filing history, assessment dates, and conduct issues line up. Recent taxes, priority taxes, unfiled returns, certain late-filed returns, payroll/trust-fund taxes, and fraud-related issues can keep the debt alive.
Another major issue is the federal tax lien. A discharge may remove personal liability, but a lien filed before bankruptcy may still affect property owned before the case.
LITRS published a plain-English guide explaining the difference between dischargeable tax debt, priority tax debt, and tax liens after Chapter 7:
Can Chapter 7 erase tax debt? Learn which older income taxes may be dischargeable, which taxes stay priority, how penalties are treated, and
