Will My Tax Debt Be Discharged In Bankruptcy

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Will My Tax Debt Be Discharged In Bankruptcy

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If I had a nickel for every time I am asked this question, I would have a lot of nickels. The elimination of tax debt in bankruptcy can be a little tricky, and I often like to meet with clients to go over the necessary documents together before I make the assessment of whether or not this debt can be discharged. However, there are a few pieces of information that I can share, which may help clarify the issue for you.

The two most common types of tax debt that I am presented involve liens due to unpaid property taxes and unpaid income taxes.

Property liens generally follow the adage “first in time, first in line.” This means that all liens against a specific piece of property are assigned a place in line. When liens are paid upon sale of the property, they are paid in this order. For example, a primary mortgage acquired at the time of home purchase is likely paid ahead of a tax lien acquired at a later date due to subsequent back taxes.

Tax liens in bankruptcy are generally only secured to the extent of remaining value in the property, after higher priority liens are paid. As with all liens, tax liens generally pass through the bankruptcy intact unless specific actions are taken to avoid them.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Christopher Ariano, Ariano and Reppucci PLLC | Attorney Advertising

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