Bankruptcy
Bankruptcy may offer a fresh start by reducing or even erasing certain tax debts, depending on your situation.
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Our 4-step
Tax Relief Process
No more calls, no more letters — you’re breaking up with the IRS.
Once you’re our client, we take over all communication.
Tell us about your IRS letters, tax debt, or unfiled returns. We’ll listen, review your situation, and explain your options.
We pull your IRS transcripts to see what the IRS sees — penalties, interest, and any missing returns — then get you filed and eligible for relief.
We design a customized strategy that fits your numbers — an Offer in Compromise, Installment Agreement, Penalty Abatement, or another relief program.
We negotiate directly with the IRS on your behalf, keep you updated every step of the way, and help you finally get back on track.
What does Declaring Bankruptcy mean?
Bankruptcy is a legal process for people or businesses who can’t afford to pay what they owe. It can cover many types of debt, including credit cards, personal loans, mortgages, car loans, and even certain IRS tax debts.
When you declare bankruptcy, you’re telling the court: “I don’t have the ability to pay what I owe, and I need a structured way to resolve it.”
Once you file, the court steps in:
A trustee is appointed to oversee your case.
Creditors (including the IRS) must stop collection efforts thanks to an automatic stay.
Depending on the type of bankruptcy, your debts are either discharged (wiped out) or reorganized into a repayment plan.
The goal is to give you a fresh start while ensuring creditors, including the IRS, get what the law requires.
Bankruptcy 101
Chapter 7 (Liquidation)
A court-appointed trustee sells some of your things to pay creditors. After that, many debts are wiped out. This can erase old income tax debts if they meet certain rules.
Chapter 13 (Repayment Plan)
You make monthly payments for 3–5 years under a court-approved plan. At the end, some remaining debts may be erased. This lets you catch up on taxes and stop IRS collections while keeping your home or car.
Chapter 11 (Business Reorganization)
Mostly for businesses or very high-debt individuals. It allows debts to be reorganized and repaid over time while the business keeps running.
Chapter 12 (Farmers & Fishermen)
Similar to Chapter 13 but made specifically for family farmers and fishermen.
Stops IRS Collections → The moment you file, the IRS must pause levies, wage garnishments, and collection calls.
May Erase Old Taxes → Older income taxes may be erased if strict timing rules are met: the return was due more than 3 years ago, the return was actually filed more than 2 years ago, and the IRS assessed the tax more than 240 days ago, with no fraud involved. The dates have traps, so we check IRS transcripts before anyone counts on a discharge.
Lets You Repay Over Time → In Chapter 13, tax debts can be rolled into your repayment plan, giving you more time and stopping interest and penalty growth.
Fresh Start → Bankruptcy combines tax debt relief with other debts (credit cards, loans, etc.), helping you move forward without overwhelming financial stress.
Bankruptcy is a powerful tool, but it is not for everyone. You have to meet requirements to qualify, depending on the type you file, and it affects far more than your tax debt.
For some people another program fits better. For others, bankruptcy resolves the IRS, state taxes, and other debts in one case.
The right answer depends on your whole picture, which is what the free consultation is for.
How We Help You Through the Process
We start with a free consultation to review your situation and explain whether declaring bankruptcy (or another program) is the right solution for you.
We prepare the forms, financial analysis, and documentation the IRS requires to improve your chances of approval.
We stand between you and the IRS, taking over all communication and negotiation while fighting for the best outcome on your behalf.
Why Choose Us?
Jason Smith, EA, CTRS was honored by the American Society of Tax Problem Solvers for expertise and dedication in tax resolution.
Proven expertise in solving IRS problems.
Licensed to represent you directly before the IRS.
No call centers, just real experts who know your case.
No hidden fees, no surprises.
We’ve helped clients just like you get on the right track with the IRS.
Frequently Asked Questions
Not everyone automatically qualifies for bankruptcy. The rules depend on the type of bankruptcy you want to file:
Chapter 7 (Liquidation)
You have to pass a “means test” that looks at your income, expenses, and household size. If your income is too high, you may not qualify for Chapter 7 and might need to consider Chapter 13 instead.
Chapter 13 (Repayment Plan)
You need to have a regular income so you can commit to a 3–5 year repayment plan. Your debts also have to be under certain legal limits. Only individuals, not businesses, can file Chapter 13.
Chapter 11 (Reorganization)
If you own a business—or if you have very large debts—you may be able to file under Chapter 11. This option is usually more complex and costly.
Chapter 12 (Farmers & Fishermen)
If you're a family farmer or fisherman with steady annual income, you might qualify for Chapter 12, which has special rules designed for your situation.
Other Requirements
No matter which chapter you file, you must:
Complete credit counseling before filing.
Have your tax returns filed and up to date. Chapter 13 requires at least the last 4 years filed.
Stay current on new tax filings and payments while your case is active.
Sometimes yes — but not always. Bankruptcy can erase (or “discharge”) certain types of debts, including some tax debts, but others will survive even after your case is closed.
Debts that may be eliminated:
Older income taxes → Older income taxes may be erased if strict timing rules are met: the return was due more than 3 years ago, the return was actually filed more than 2 years ago, and the IRS assessed the tax more than 240 days ago, with no fraud involved.
Credit cards & personal loans → These are usually wiped out in bankruptcy.
Medical bills → Typically eliminated along with other unsecured debts.
Debts that cannot usually be eliminated:
Recent income taxes → Taxes less than 3 years old must still be paid.
Payroll or trust fund taxes → Money withheld from employees must always be repaid.
Student loans → Rarely discharged, except in very limited hardship cases.
Child support & alimony → Never discharged in bankruptcy.
Debts from fraud, fines, or criminal restitution → Remain even after bankruptcy.
Mortgages & car loans → You can wipe out your responsibility, but if you want to keep the house or car, you must keep paying.
Bankruptcy can give huge relief by wiping out older IRS tax debts along with credit cards, loans, and medical bills. But it won’t erase every type of debt. That’s why it’s important to have an expert review your case before filing — so you know exactly what debts bankruptcy will and won’t clear.
Chapter 7 (Liquidation):Stays on your credit report for 10 years from the filing date.
Reason: Since most of your debts are completely wiped out, the impact is considered more serious.
Chapter 13 (Repayment Plan):Stays on your credit report for 7 years from the filing date.
Reason: You pay back part of your debts over 3–5 years, so it’s seen as less damaging than Chapter 7.
Chapter 11 (Business Reorganization):Typically reported for 10 years, similar to Chapter 7, though it affects businesses more than individuals.
Chapter 12 (Farmers & Fishermen):Usually treated like Chapter 13 — about 7 years on your record.
What This Means for You
The record of your bankruptcy can make it harder to get credit, loans, or a mortgage for a while. But the impact lessens over time, especially if you rebuild credit with on-time payments and responsible use. And most importantly, bankruptcy gives you a fresh start — the chance to move forward without the crushing weight of old debt.
Not by itself. A discharge wipes out your personal responsibility for a tax debt that qualifies, but if the IRS filed a Notice of Federal Tax Lien before your case started, that lien can survive the bankruptcy and stay attached to property you own.
Whether a lien is on file, and when it was filed, changes the whole analysis. That's one of the first things we check on your IRS transcripts before bankruptcy is even on the table.
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