Income Tax Debt Relief Through Bankruptcy

One of the most famous quotations by Benjamin Franklin is: “Nothing is certain but death and taxes.” While little can be done about the certainty of death, the attorneys at Villani and DeLuca P.C. can help manage income tax debt through bankruptcy. Bankruptcy can be a very effective tool for dealing with tax debts but determining which taxes are dischargeable can be confusing and complex. Our bankruptcy attorneys take all of our cases seriously and will review your tax returns, tax bills and history to determine whether your taxes are dischargeable in bankruptcy in New Jersey.


Bankruptcy is a right granted in the U.S. Constitution, which is regulated under federal law either under Chapter 7 or Chapter 13. A Chapter 7, sometimes called a “liquidation action”, can discharge (wipe-out) most debt and enable you to protect most, if not all, of your assets. In a Chapter 7 case, some income taxes can be completely dischargeable in bankruptcy. Under Chapter 13, you pay back creditors pursuant to a monthly repayment plan; which means you may be able to remove the tax liability or just pay a percentage.

You can discharge IRS and New Jersey tax debts if:

• The taxes are actually income taxes (not penalties, payroll taxes or fraud penalties)
• The debt due is at least three years old.
• You filed a tax return at least two years before filing for bankruptcy.
• You pass the “240-day rule.” The income tax debt relief must have been assessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet.
• You did not commit fraud or make efforts to willfully evade payment.

Even if your taxes do not meet the requirements for a discharge, bankruptcy may still help by putting the debt in a Chapter 13 debt repayment plan and pay the debt off over a three- to five-year period.

Got Tax Debt?

If you have significant tax debt or if you continue to receive letters and threats of legal action from the taxing authorities, it is important to consult with an experienced Villani & DeLuca P.C. bankruptcy attorney. Call 732-965-3350 for a free consultation and we can evaluate your case to determine whether your tax debt could be discharged in bankruptcy. Attorney Robert H. Johnson is Board Certified as a Consumer Law Bankruptcy Attorney. He is the founder of The Bankruptcy Law Group in Cherry Hill. If you feel like you are drowning in debt, don’t wait any longer. In as little as a few months, you can have a fresh start.