Are Delinquent Taxes Dischargeable in Bankruptcy?

The current bankruptcy law ushered in sweeping changes in how bankruptcies are handled and what can be discharged. It is a very restrictive law.  As under the previous law, some taxes will be dischargeable and some will not.  Perhaps the biggest restriction is that many people who would have qualified to file for

 

bankruptcy under the old law are not able to file under the new rules that took effect on October 17, 2005. The new law is a “needs-based” law and has resulted in fewer consumers being able to use Chapter 7 bankruptcy as a quick fix for extinguishing credit card bills and other unsecured debts.

Of course, this also means that they cannot extinguish delinquent taxes that might otherwise have been dischargeable because they will not be able to file for protection.  There are many criteria to be met before taxes can be discharged.  However, the first rule is that the tax must have been assessed at least three years before the bankruptcy filing.  This does not refer to the tax year, but when the tax was actually filed.  Thus, if one’s income tax return for 2005 was not filed until 2010, it would not be dischargeable if one filed for bankruptcy in 2011.