Taxes and Bankruptcy
Learn how bankruptcy can help relieve your tax debt and how your tax refund is treated in bankruptcy.
Learn what to look out for if you have tax debts and how to eliminate old tax debts by filing bankruptcy. Plus, learn how to protect your tax refund.
This page is your home base for learning about all things taxes.
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Filing Bankruptcy on Tax Debt? What You Need to Know
Written by Ben Jackson. Legally reviewed by Jonathan Petts
Updated March 26, 2025
Bankruptcy can eliminate some IRS tax debt, but it depends on the type of tax debt and how long you’ve owed it. Chapter 7 bankruptcy can wipe out older income tax debt if it meets strict IRS rules. If your tax debt doesn’t qualify for discharge, Chapter 13 bankruptcy may still help by stopping IRS collection efforts and setting up a structured repayment plan that can help you get back on track. Even if bankruptcy can’t erase your tax debt, it can give you breathing room by pausing IRS actions like wage garnishment and bank levies. If you’re struggling with tax debt, understanding your options can help you find the best path forward.
Read More →What Happens to Your Tax Refund in Bankruptcy?
Written by Attorney Paige Hooper. Legally reviewed by Jonathan Petts
Updated March 14, 2025
In Chapter 7 bankruptcy, tax refunds for income earned before your bankruptcy filing date usually become part of your bankruptcy estate. If the funds aren’t protected by exemptions and you hold on to them, the trustee can use them to pay creditors. However, if you receive your refund and spend it on necessary expenses before filing, it won’t be included in your bankruptcy estate. In Chapter 13 bankruptcy, tax refunds distributed during your repayment plan are typically part of the estate and may go toward paying creditors. Protecting your refund depends on timing, exemptions, and how the funds are used.
Read More →Can You File Bankruptcy if You Haven't Filed Tax Returns?
Written by Kristin Turner, Harvard Law Grad.
Updated April 18, 2025
To file bankruptcy, you'll need to have filed your last two years of tax returns if you were employed and required to do so. If you weren't employed or required to file taxes, you don't need to worry about filing tax returns before filing bankruptcy.
Read More →What Is a Tax Return?
Written by Jonathan Petts. Legally reviewed by Ben Jackson
Updated April 22, 2025
It is important to take all the necessary steps to make sure that you have copies of your tax returns or transcripts when you file for bankruptcy. Your tax returns will give the Bankruptcy Court and your Trustee an idea of your financial history. To ensure your bankruptcy case goes smoothly make sure to locate copies of them before filing your bankruptcy case, so you don’t have to rush later.
Read More →Tax Credits and Bankruptcy
Written by Attorney Eva Bacevice.
Updated April 22, 2025
Tax credits reduce the total tax owed by the individual or family claiming the credit. Many low-income families have all or a portion of such a tax credit refunded to them once their tax return is filed and their eligibility to claim the credit confirmed by the Internal Revenue Service. This article will review some of the most commonly used tax credits available to low-income individuals and how these credits are treated in a Chapter 7 bankruptcy.
Read More →Can a Married Person File Taxes Without Their Spouse?
Written by Lawyer John Coble. Legally reviewed by Jonathan Petts
Updated April 21, 2025
A married couple filing income tax returns can choose to do so married filing jointly or married filing separately. In the past, the primary reason for filing separate tax returns was to shield one spouse from the tax liability of the other spouse. Couples filing separate returns paid much more in income taxes than couples filing joint returns. Today, with tax law changes, there are situations where filing separately can result in a lower combined tax burden.
Read More →How To Deal With an IRS Wage Garnishment and Protect Your Paycheck
Written by Mae Koppes. Legally reviewed by Jonathan Petts
Updated March 25, 2025
If you have unpaid federal tax debt, the IRS will send multiple warning letters. If you don’t respond or arrange a payment plan, the IRS can take action to collect, including a tax levy that may garnish your wages. This means your employer will withhold a portion of your wages and send it to the IRS. In this article, we’ll explain how IRS wage garnishment works, how much they can take from your paycheck, and what options taxpayers have to stop or prevent it.
Read More →Tax Refund Offset and Timing a Bankruptcy Case
Written by Lawyer John Coble. Legally reviewed by Jonathan Petts
Updated April 23, 2025
There are several different federal, state, and local government agencies that can intercept your federal tax refund if you owe money to these agencies. This procedure is known as a tax offset. This article will look at which agencies can take your refund and how bankruptcy can help you with tax refund offsets.
Read More →Can the IRS Take Your Home if You Owe Back Taxes?
Written by Mae Koppes. Legally reviewed by Attorney Andrea Wimmer
Updated March 20, 2025
The IRS can legally take your home if you owe back taxes. But this is rare and typically a last resort. Before taking your home, the IRS will try to collect through tax liens, wage garnishments, bank levies, and tax offsets. If the IRS does move to seize your home, they must follow strict legal procedures, including court approval and giving you notice with a chance to appeal. You can stop home seizure by requesting a hearing, setting up a payment plan, filing Form 911 with the Taxpayer Advocate Service, or considering bankruptcy.
Read More →What Is The IRS Statute Of Limitations?
Written by the Upsolve Team. Legally reviewed by Attorney Andrea Wimmer
Updated April 22, 2025
Most people in the United States have to deal with tax issues at least once in their lives. If those tax issues lead to tax debt, generally, the IRS has 10 years to collect it. The 10 year period starts with the filing of the return or assessment by the IRS. However, there are a few situations that can pause this 10-year period, which gives the IRS more time to collect.
Read More →Using an Offer in Compromise to Settle a Tax Debt
Written by Attorney Serena Siew.
Updated May 3, 2021
An Offer in Compromise is a good choice when there's a large debt covering more than one tax year. The IRS will only consider an offer if you meet all the eligibility criteria and the IRS finds that making you pay your entire tax burden would cause extreme financial hardship.
Read More →What Is an IRS Collection Due Process Hearing?
Written by Lawyer John Coble.
Updated June 5, 2021
When the IRS attempts to levy or place a lien on your property, you have the right to a collection due process (CDP) hearing. If you're like most people, you're panicking. Take deep breaths. This article explains the rights you still have and how you can avoid enforcement of the lien or levy.
Read More →How (and Why) To File Back Taxes if You Haven’t Filed in Years
Written by Lawyer John Coble. Legally reviewed by Jonathan Petts
Updated January 24, 2025
If you haven't filed a tax return in years, you may be wondering how to get back on track. The best way to make up for missed filings is to go back and file your old/missed returns with the Internal Revenue Service (IRS). Late or missing tax return filings can lead to penalties and possible legal trouble. If you have missed any tax filings in previous years, gather your old tax forms and file as soon as possible. You can file old tax returns online, in person at a local IRS office, or by mail.
Read More →Can I Settle My Tax Debt With The IRS For Less?
Written by Curtis Lee, JD.
Updated April 23, 2025
Few debts are as difficult to deal with as back taxes, so it’s sometimes surprising to learn that there are several methods available to reduce your tax liability with the IRS for less than what you owe. This article will explain what these options entail, how they work, and other information to help you decide if they’re options that you should consider when dealing with your tax bill.
Read More →4 Ways To Get "Currently Not Collectible" Status From The IRS
Written by Lawyer John Coble. Legally reviewed by Jonathan Petts
Updated January 30, 2025
If you're granted IRS currently not collectible status, the IRS will no longer try to collect taxes from you via bank account levies, wage garnishments, or seizures of your other property. If you can't afford to pay anything toward your IRS tax debt, you'll need to request CNC status. Otherwise, you could see your paycheck garnished or have funds in your bank account taken from you due to a bank account levy.
Read More →What Is Form 656 And How Do I File One?
Written by Attorney Tori Bramble.
Updated August 23, 2021
If you owe back taxes to the IRS, the offer in compromise (OIC) program could help you settle your tax debt by paying less than what you owe. You’ll have to fill out Form 656 to make an offer in compromise to the IRS, which will include the details of your repayment offer. This article will expand on eligibility requirements for OICs, benefits for low-income filers, how to fill out a Form 656, and what you need to send to the IRS along with the form.
Read More →IRS Payment Plan Installment Agreements
Written by Attorney Tori Bramble.
Updated August 21, 2024
If you can't pay in full after filing your taxes, one of your options involves entering into an installment agreement from the Internal Revenue Service (IRS). Installment agreements are payment plans with the IRS that let you pay off your tax debt over a set timeframe. There are many installment agreement payment options available to taxpayers to settle tax debt. In this article, you'll learn about the different payment plans that can help you wipe out your tax debt.
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