Except for County Tax Claim Bureaus, an unsecured creditor does not have a recorded property interest in the debtor’s property. Examples of these creditors are:
- People with child support or other domestic relations-related claims such as alimony and equitable distribution;
- Employees to whom you owe wages (up to $12,745.00);
- The IRS and PA Department of Revenue for unpaid income taxes when they have not recorded a tax lien;
- County Tax Claim Bureaus for unpaid real estate taxes.
It is commonly misunderstood that income taxes are never dischargeable. However, Federal and Pennsylvania income and payroll taxes you owe are dischargeable along with interest and penalties only if four conditions are met:
- Taxes were due at least three years before the bankruptcy filing (the “Three-year rule”) AND
- You filed the returns at least two years before the bankruptcy (the “Two-year rule”) AND
- The IRS or PA Department of Revenue assessed the overdue income taxes at least 240 days before the bankruptcy filing (the “240 day rule”) AND
- There is no recorded tax lien for the taxes.
If you want to file bankruptcy to discharge delinquent taxes, Media bankruptcy lawyer Robert G. Williamson at Williamson & Williams will obtain the necessary documentation and guide you through the calculations necessary to determine if your income tax debts are dischargeable under all three of the 240 Day Rule, the Two-Year Rule and Three-Year Rule.
Certain debts are not dischargeable in a Chapter 7:
- Child support and domestic relations-related claims.
- Federal and state taxes other than income and payroll taxes, other than as described above.
- Payroll taxes you withheld from employees.
- Debts incurred by fraud.
Any of these debts could be discharged in a Chapter 13 or 11 where your Reorganization Plan provides that any particular debt of this type will be discharged when your Reorganization Plan is successfully completed and the effected creditor does not object to the Plan.