There is a lot of confusion out there regarding Taxes and Bankruptcy. Many people, even trained professionals, believe income taxes can never be discharged in bankruptcy – but they’re wrong.
The fact is that certain income taxes are in fact dischargeable in bankruptcy. If you filed your income tax returns more than two years before your bankruptcy and the due date for these returns is more than 3 years before, you can generally discharge outstanding income tax returns in bankruptcy while at the same time protecting equity in your home and other important assets. However, there are many situations that affect these timelines. For instance, the time in which an Offer in Compromise is outstanding will extend the timeline. Also, if the Internal Revenue Service, State of Ohio or City of Toledo file and assess returns for you, these taxes are never dischargeable in bankruptcy. The services of a qualified bankruptcy attorney are essential to determine whether you qualify for this relief in this very complex area of the law.