The truth is income taxes are dischargeable in bankruptcy if 3 reasonably simple conditions are met; debts to the government are generally dischargeable in bankruptcy.
Please reread that line, and get that bit of law in your head.
Because you wouldn’t know the truth of the statement above from reading the blog of this lawyer (who puts himself forward as an expert on bankruptcy law) whose opening line is utterly and absolutely wrong on the law.
Is Vincent Howard of Orange County really giving this information out to his clients? I surely hope not.
We routinely tell our clients, he assures us, “that tax debts are not dischargeable in bankruptcy. The public policy goal of this rule is clear: bankruptcy must not allow debtors to escape debts to the government…”
The Simple Truth About Discharging Taxes In Bankruptcy
The Bankruptcy Code starts from the proposition that all unsecured debts are dischargeable, and calls out the exceptions in Section 523.
A bit oversimplified, the rule is this: income taxes can be wiped out in bankruptcy if the return was due without penalty more than three years before the bankruptcy case is filed; if the return was filed late, it has been on file for two years; and the taxes in question were assessed more than 240 days before the bankruptcy was filed.
So, the correct statement of the law is that some income taxes cannot be discharged; other, older income taxes can be discharged.
Discharge Of Debts To The Government
Despite what the Howard Law Firm says, debts to the government are generally dischargeable. Debts for overpayment by the Social Security Administration can be discharged; SBA loans, guaranteed by the government are dischargeable. Again, nondischargeability is the exception, not the rule.
Just Because The Website Says So, Doesn’t Make It True
Perhaps the democratization of publishing that came with the internet and blogging software was a mixed blessing. For every genuine contribution to the public’s understanding of bankruptcy law, there’s some lawyer writing about bankruptcy to get his name before his community, without regard to the accuracy of the information he puts out. And if he genuinely believes the law is as his blog states, then he stands to harm his clients.
As lawyers, we have a duty to the public to get this stuff right. The public is injured when someone who has the credentials that suggest he is a reliable source spreads inaccuracies.
Bankruptcy law is complicated, sometimes uncertain, and these days, evolving as the courts interpret the mess that is “bankruptcy reform”. But the law about the dischargeability of taxes hasn’t changed markedly in more than three decades.
If you are a consumer or small businessperson trying to get your arms around what bankruptcy offers, read on here. Test propositions about the law across several sites. Buy an hour of an experienced bankruptcy lawyer’s time and double check what your internet research has turned up.
The world of bankruptcy information on the internet is a jungle.