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When it comes to overwhelming tax debt, many Americans feel stuck between a rock and a hard place. But there may be a way out — and it’s not always as drastic as it sounds. 

While most tax debt is difficult to discharge, Chapter 7 bankruptcy could offer real tax relief for those who qualify.

Here’s what you need to know about using bankruptcy as a tax solution, how it works, and who might benefit from it.

💡 Bankruptcy and Tax Debt: What’s the Connection?

It’s a common misconception that all tax debt survives bankruptcy. In reality, under specific circumstances, some federal or state income tax debts can be discharged through Chapter 7 bankruptcy.

However, the process is detailed and highly technical. You must meet five key conditions to potentially eliminate tax debt this way.

✅ Conditions for Discharging Tax Debt Through Bankruptcy

To wipe out tax debt through Chapter 7 bankruptcy, all of the following must apply:

1. The Debt Must Be Income Tax Debt

Only federal or state income tax debts are eligible. Other types of taxes — like fraud penalties, payroll taxes, or trust fund taxes — are not dischargeable.

✔️ Tax Solution Tip: Review your debt carefully to determine if it falls into this category. If you're unsure, a tax relief specialist can help assess it.

2. No Fraud or Willful Tax Evasion

If you filed a fraudulent return or deliberately tried to evade taxes, you’re out of luck. The IRS does not discharge debts related to dishonest behavior.

✔ ️ Be Honest: Bankruptcy laws are built to support taxpayers who made mistakes — not those who tried to cheat the system.

3. The Tax Debt Is at Least 3 Years Old

This is often called the “3-year rule.” The original tax return that led to your debt must have been due at least three years before you file for bankruptcy.

Example: Filing for bankruptcy in April 2025 could only discharge tax debt from the 2021 tax year (due in April 2022).

4. You Filed a Return at Least 2 Years Ago

Filing a return is a must. If you missed the deadline or filed very late, your debt likely won’t qualify.

✔️ Tax Relief Tip: Even if you’re behind, filing a return now starts the clock toward potential relief.

5. The Tax Debt Was Assessed at Least 240 Days Ago

Known as the “240-day rule,” the IRS must have assessed your tax liability at least 240 days before you file for bankruptcy — or not assessed it at all yet.

🚫 If the IRS delayed collection efforts due to an Offer in Compromise or a previous bankruptcy, the timeline may extend further.

🏠 What About Tax Liens?

Tax debt and tax liens are not the same thing.

• Tax debt is what you owe.
  
  
• A tax lien is a legal claim placed on your property to satisfy that debt.
  
  

Here’s the tricky part: Chapter 7 bankruptcy can discharge tax debt, but not tax liens.

If a lien was filed before your bankruptcy case, it remains attached to your property. That means if you sell your home or another asset, you’ll have to pay the lien off before closing the deal.

✔️ Tax Solution Insight: While bankruptcy may not remove the lien, it does protect your income and bank accounts from IRS garnishment moving forward.

⚖️ Is Bankruptcy the Best Tax Relief Option?

Filing for bankruptcy is a serious financial step. It can impact your credit, future borrowing potential, and overall financial stability.

That’s why it’s critical to explore all other tax solutions first, such as:

• Installment agreements
  
  
• Offer in Compromise
  
  
• Penalty abatement
  
  
• Hardship status or temporary collection delays
  
  

Bankruptcy should be seen as a last resort — but it can be a powerful tax relief tool for those who qualify.

🔍 Need Help Navigating Your Tax Debt?

Understanding whether your tax debt can be discharged through bankruptcy isn’t easy. But you don’t have to figure it out alone.

At, we specialize in helping people just like you explore all their tax relief options — including the possibility of bankruptcy. We work with trusted legal and financial experts to review your case, identify opportunities, and create a plan tailored to your needs.

📞 Ready to Explore Your Tax Solution?

If you’re drowning in tax debt, it’s time to take action.
👉 Contact Resoly today for a consultation — and let’s find the right tax solution for your financial future.