Author: Andrew M. Thaler
The answer to the question of whether you can discharge taxes in personal bankruptcy is – it depends. This is a very complicated area of bankruptcy law. Whether a tax will be discharged depends in part on the type of tax, when the tax was incurred and the conduct of the tax payer. While most taxes cannot be discharged in bankruptcy, there are some taxes that can.
First, let’s discuss taxes that are not dischargeable. If sale or payroll taxes are owed, they will not be discharged in a personal chapter 7 bankruptcy. Those taxes are collected by the business/taxpayer for the benefit of the state or federal government. Individuals collect such taxes as a “fiduciary”. A fiduciary is a person or business with the power and obligation to act for another under circumstances which require total trust, good faith and honesty.
First, let’s discuss taxes that are not dischargeable. If sale or payroll taxes are owed, they will not be discharged in a personal chapter 7 bankruptcy. Those taxes are collected by the business/taxpayer for the benefit of the state or federal government. Individuals collect such taxes as a “fiduciary”. A fiduciary is a person or business with the power and obligation to act for another under circumstances which require total trust, good faith and honesty.
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