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Back Taxes and Bankruptcy

Questions about your tax debts and bankruptcy?

Talk to a Renton, WA bankruptcy attorney today!

Are back taxes discharged in a Washington State bankruptcy? 

Whether taxes can be discharged in bankruptcy is a complicated question.  Property tax is always tied to the property – if you want to keep the property, you have to pay the tax.  If you surrender it, you are not personally liable.  Income taxes can only be discharged under certain circumstances.

If the tax is over three years old and the return was filed at least two years ago and the return was not fraudulent, the tax can be discharged.  That means 2006 taxes and earlier could be discharged in bankruptcies filed after April 15, 2010, which is three years after they were due, April 15, 2007.

If the taxes cannot be discharged but you are paying something back to your creditors, either by property that is liquidated in a Chapter 7, or through a Chapter 13 repayment plan, these taxes will be paid as “priority unsecured debts”.  That means they get paid before “general unsecured” debts like credit cards.

So, if you owe taxes and are one of the few who gives up some property in a Chapter 7 or you file a Chapter 13, at least those taxes get paid before the debt you can discharge.  If there’s nothing left for the discharged debts, they just get cancelled in your bankruptcy after the taxes (or part of them) are paid.