Bankruptcy Law Practice Areas

Bankruptcy Basics provides general information about federal bankruptcy laws and the bankruptcy process. It is not a guide for filing for bankruptcy.

Bankruptcy Basics is a publication of the Administrative Office of the U.S. Courts.  It provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of federal bankruptcy laws. It also provides individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed and answers some of the most commonly asked questions about the bankruptcy process.

Bankruptcy Basics (pdf) For cases filed before October 17, 2005

Bankruptcy Basics (pdf) For cases filed on or after October 17, 2005 

Bankruptcy Basics is not a substitute for the advice of competent legal counsel or a financial expert, nor is it a step-by-step guide for filing for bankruptcy. The Administrative Office of the United States Courts can provide legal or financial advice. Such advice may be obtained from a competent attorney, accountant, or financial adviser.

Bankruptcy and Back Taxes

Bankruptcy can, in many cases, be a very effective tool to deal with your tax debts. Under the right
circumstances you are able to discharge personal income taxes owed to the IRS or the state taxation
authorities. Even if a particular tax debt cannot be discharged, filing bankruptcy can help stop IRS
collection actions against you and also give you time to pay off the tax debt.

Which Tax Debts can be Discharged?

Generally personal income taxes owed to the Internal Revenue Service and the State taxation
authorities can be discharged if the following conditions are met:

  • The tax debt in question is over three years old.
  • The tax debt arises from a return filed over two years before filing bankruptcy.
  • The tax debt was assessed more than 240 days prior to filing bankruptcy.
  • There tax debt is not a result of willful attempts to evade personal income tax.

What happens if the Tax debt cannot Be Discharged?

If your tax debt cannot be discharged, you may still be able to enter a Chapter 13 debt repayment plan
and pay the debt off over a three- to five-year period. Also filing a Chapter 13 bankruptcy will stop the
IRS from levying your wage or taking any additional steps to collect. It will also stop tax penalties (but
not interest). At the end of your payment plan, the IRS may or may not come after you for interest on
your tax debt.