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Bankruptcy

: Arizona Bankruptcy Attorney Blog

11 USC 523: What WON'T Go Away in a Chapter 7 Banrkuptcy, Part I: Tax Debt

By Joseph McDaniel, Esq.

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It's important that you know what debt will survive your Chapter 7 Bankruptcy in Arizona, and everywhere else.

One starting point is 11 USC 523. Now, reading it at one sitting and trying to digest it can make a strong man go into seizures, so I'll be slicing and dicing it for the next week or two, so that a normal human can get an idea of what it means.

Here's today's lesson about nondischargeable debts: if it's a tax debt, it will probably survive your Chapter 7 Bankruptcy Case. Now, not all tax debts are non-dischargeable in a Chapter 7, but that's a postgraduate course that I'll tell you about another day.

For today, however, you will read a fairly thin slice of 11 USC 523, and you will take away this lesson: if it's a tax debt owed on the date we file your bankruptcy, you will probably still owe the debt.

And here's the slice of the statute that gets us to that conclusion, and if you start to feel faint, sit down and put your head between your knees:

"...does not discharge an individual debtor from any debt?

(1) for a tax or a customs duty?

(A) of the kind and for the periods specified in section 507 (a)(3) or 507 (a)(8) of this title, whether or not a claim for such tax was filed or allowed;

(B) with respect to which a return, or equivalent report or notice, if required?

(i) was not filed or given; or

(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or

(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;"

Full post as published by Arizona Bankruptcy Attorney Blog on February 23, 2011 (boomark / email).