You may have seen commercial promising to greatly reduce tax debts. If you're unemployed, underemployed or experiencing a great financial hardship, you may be wondering if there is another way.

You're considering filing for bankruptcy, and now you want to know if it's possible to eliminate tax debts through bankruptcy. It is possible to include certain tax debts in bankruptcy, but you must meet specific requirements first.

If you currently owe a lot in back taxes and you hope to discharge them in bankruptcy, a Chapter 7 would be the ideal way to go. However, you can only include your taxes in a Chapter 7 if the taxes qualify and your income qualifies you for a Chapter 7 bankruptcy.

Discharging Tax Debt in a Chapter 7 Bankruptcy

To discharge or "wipe out" your federal income taxes through a Chapter 7, you will need to meet the following requirements:

• You are including income taxes, not fraud penalties or payroll taxes.
• You did not file a fraudulent tax return.
• You did not try to evade paying taxes by using a fake Social Security number.
• The tax debt is at least three years old.
• You filed a tax return for the debt at least two years ago.
• The tax debt was not assessed by the IRS yet, or it was assessed 240 days before you file for bankruptcy.

If you have a prior recorded tax lien, it cannot be discharged through a Chapter 7 bankruptcy.

If your taxes qualify, the bankruptcy will eliminate your obligation to pay that tax debt, and the IRS will not go after your wages or bank account. However, if the IRS recorded a lien against your property before you file for bankruptcy, the lien will still be on your property. You will have to pay off the tax lien before you'll be able to sell your home.

If you need more information about taxes and bankruptcy, contact a bankruptcy attorney for help!