Can Bankruptcy Eliminate IRS Tax Debt? What You Need to Know

If you’re buried in IRS debt and considering bankruptcy, you may be wondering:
“Can I wipe out my tax debt along with everything else?”

The answer is: Sometimes.

At IRS Trouble Solvers, we guide clients through the complicated relationship between bankruptcy and IRS debt. If you meet specific criteria, you may be able to discharge some or all of your tax liability—but if you don’t, bankruptcy could make things worse.

Let’s break it down.

The Two Main Types of Bankruptcy

Most individuals file under:

• Chapter 7 – Liquidation of assets; used to discharge unsecured debts
• Chapter 13 – Debt reorganization; used to create a 3–5 year repayment plan

Both can deal with tax debt, but under strict conditions.

When IRS Tax Debt Can Be Discharged

To wipe out tax debt in Chapter 7 bankruptcy, you must meet ALL of the following:

1. The Taxes Must Be Income Taxes

Payroll taxes, fraud penalties, and trust fund taxes are not dischargeable.

2. The Tax Debt Must Be at Least 3 Years Old

The return that created the debt must have been due at least 3 years before filing.

3. You Must Have Filed the Return at Least 2 Years Ago

The return must have been filed by you, not just by the IRS (i.e., no substitute returns).

4. The Tax Assessment Must Be at Least 240 Days Old

The IRS must have assessed the tax at least 240 days before your bankruptcy filing.

5. No Tax Fraud or Evasion

If you filed a false return or tried to evade taxes, the debt cannot be discharged.

What If You Don’t Qualify?

Don’t worry—there are still options:

• Chapter 13 bankruptcy may allow you to pay IRS debt over time without added penalties.
• Offer in Compromise, Installment Agreements, or Currently Not Collectible (CNC) status may be better solutions.

📌 Important: Not all bankruptcy attorneys are tax experts. You need a team that understands both sides of the system.

Why Filing Bankruptcy Without Strategy Can Backfire

• You could discharge credit card debt but still owe the IRS
• You might lose assets unnecessarily
• You may damage your ability to negotiate outside bankruptcy
• Some tax liens stay on record, even after discharge

✅ Our team works with your bankruptcy attorney to ensure you’re making the right move for your tax situation and financial goals.

Real Client Story

“I thought bankruptcy would wipe out everything, but my IRS debt didn’t qualify. IRS Trouble Solvers helped me avoid a bad move—and settle my taxes through Offer in Compromise instead.”
— Client from Denver, CO

Final Thoughts

Bankruptcy isn’t a magic bullet for tax debt—but under the right conditions, it can provide powerful relief.

If you’re considering bankruptcy or already in it, let’s review your IRS situation first. You might have better—and safer—options.

Thinking about bankruptcy for IRS tax debt? Talk to us first.
📞 Call 844-229-8936 or visit www.irstroublesolvers.com for a free, confidential consultation.