Bankruptcy & Tax Debt: Can Bankruptcy Help with IRS Problems?
Bankruptcy is often thought of as a last resort—but in the right situation, it can be a powerful tool to finally break free from overwhelming tax debt.
Not all tax debts qualify for discharge in bankruptcy, but some do. Others may not be wiped out completely, yet they can often be restructured into a manageable payment plan. If you’re buried under IRS debt and other financial obligations, understanding how bankruptcy and taxes intersect is critical.
Can You Discharge Tax Debt in Bankruptcy?
The short answer: sometimes.
Certain income tax debts may be discharged (erased) through bankruptcy if they meet very specific requirements. Other types of tax debt may survive bankruptcy but can be managed through a structured repayment plan.
Which Tax Debts May Qualify for Discharge?
Income tax debt may be eligible for discharge under Chapter 7 or Chapter 13 bankruptcy if all of the following conditions are met:
The tax return was due at least 3 years ago
You filed the return at least 2 years ago
The IRS assessed the tax at least 240 days ago
The debt is related to income taxes only (not payroll, restitution, or certain civil penalties)
You did not commit fraud or willful tax evasion
If these conditions are satisfied, your qualifying income tax debt may be legally eliminated in bankruptcy.
Other Benefits of Bankruptcy When Dealing with the IRS
Even when tax debt doesn’t qualify for discharge, bankruptcy can still provide important protections:
Automatic Stay – Immediately stops most IRS collection actions, including levies, garnishments, and seizures.
Time to Catch Up – Chapter 13 bankruptcy gives you structured time to repay past-due taxes.
Penalty & Interest Relief – Penalties and some interest may be frozen or reduced.
Fresh Start – Once the bankruptcy process is complete, you can move forward without the constant weight of IRS collection pressure.
How King Palm Tax Can Help
Bankruptcy and taxes are both complicated—and combining the two requires careful strategy. At King Palm Tax, we:
Review your IRS debt to determine if it qualifies for discharge
Coordinate with bankruptcy attorneys when needed
Represent you before the IRS to stop or prevent enforcement actions
Explore all resolution options so you can make an informed decision
Bankruptcy isn’t right for everyone. But for the right taxpayer, it can be a life-changing solution.
Find Out If Bankruptcy Is the Right Tool for You
If you’re overwhelmed by IRS debt and struggling to stay current with other bills, bankruptcy may offer a path forward. But the first step is understanding whether it applies to your unique situation.
📞 Contact King Palm Tax today for a free consultation. We’ll review your case, explain your options, and guide you toward the best resolution strategy.