Maryland Bankruptcy Law: Can You Discharge IRS Debt?

Maryland bankruptcy law provides individuals and businesses with the opportunity to manage or eliminate certain debts, but when it comes to IRS debt, the rules can be complicated. Understanding whether you can discharge IRS debt in bankruptcy is crucial for anyone facing financial difficulties.

Under federal bankruptcy law, not all debts can be eliminated through bankruptcy. When it comes to IRS tax debts, the dischargeability depends on several factors.

Firstly, to qualify for discharge of IRS tax debt under Chapter 7 bankruptcy, the following criteria must be met:

• Time Frame: The tax debt must be at least three years old. This means the tax return must have been due at least three years prior to filing for bankruptcy.
• Filing Requirement: You must have filed a tax return for the debt you wish to discharge. If you failed to file a tax return, the IRS debt is not dischargeable.
• Assessment Deadline: The IRS must have assessed the tax debt at least 240 days before you file for bankruptcy. If the IRS has not assessed the debt or if it was recently assessed, you may not be able to discharge it.
• No Fraud or Willful Evasion: You cannot have committed tax fraud or have attempted to evade tax payment. If the IRS determines that your debt is due to fraud, it cannot be discharged.

For individuals who do not qualify for Chapter 7 bankruptcy, Chapter 13 may offer another option. In Chapter 13 bankruptcy, taxpayers can negotiate a repayment plan that lasts between three to five years, allowing them to pay back a portion of their debts, including IRS tax debts. Some tax debts may be partially discharged at the end of the repayment period if all other payments are made as agreed.

Furthermore, it's important to note that filing for bankruptcy can trigger certain tax liabilities. For example, any tax return created during the bankruptcy process can influence how the IRS assesses your debts, so it's crucial to remain compliant with your tax obligations throughout the bankruptcy period.

IRS debt can be a significant burden, but understanding the intricacies of Maryland bankruptcy law can aid individuals in navigating their financial situations. Consulting with a bankruptcy attorney who specializes in tax issues can provide personalized guidance tailored to your specific circumstances, helping you to explore all avenues available for discharging IRS debt.

In conclusion, discharging IRS debt under Maryland bankruptcy law is possible, but it comes with specific requirements. By ensuring that your tax debts meet the necessary criteria for discharge, you can take a vital step toward regaining financial stability.