Can I Discharge Tax Debt Through Bankruptcy in Louisiana?
Can I Discharge Tax Debt Through Bankruptcy in Louisiana?
Facing tax debt can be one of the most stressful financial burdens — especially when it feels like there’s no way out. However, depending on your situation, bankruptcy may offer relief from certain types of tax debt in Louisiana. Understanding how this process works is essential before deciding whether bankruptcy is the right path for you.
Tax Debt and Bankruptcy: The Basics
Not all tax debts are dischargeable in bankruptcy. Generally, income tax debt may be wiped out if it meets specific criteria, while other types of taxes — such as payroll or fraud-related taxes — usually cannot be discharged.
To qualify for discharge under Chapter 7 or Chapter 13 bankruptcy, your income tax debt must meet these conditions:
- The taxes are at least three years old. The return must have been due at least three years before filing bankruptcy.
- You filed your tax return on time. Late-filed returns may disqualify you from discharging the debt.
- The IRS has assessed the tax at least 240 days before you file.
- No fraud or willful evasion occurred. If the IRS believes you intentionally avoided paying taxes, the debt will remain.
If these requirements are met, bankruptcy can erase qualifying income tax debts, giving you a chance to start fresh.
Chapter 7 vs. Chapter 13 in Louisiana
- Chapter 7 Bankruptcy: Offers a full discharge of qualifying debts, including eligible tax debts. This option is ideal for individuals with limited income and few assets.
- Chapter 13 Bankruptcy: Allows you to create a repayment plan lasting three to five years. It may not discharge all tax debt but can reduce penalties and interest while preventing IRS collection actions.
The Importance of Legal Guidance
Bankruptcy laws are complex, and tax-related cases are especially nuanced. A Louisiana bankruptcy attorney can review your financial records, determine which debts qualify for discharge, and guide you through the process of filing properly.
At Hester Law Firm, we can provide legal assistance to the Baton Rouge public and help you explore whether bankruptcy can relieve your tax debt burden.
