Some debts, such as debts that you incurred as a result of fraud, alimony, child support, criminal acts, wages owed to others, penalties and fines, student loans and certain taxes, and credit card use for luxury goods or services are not discharged in bankruptcy. Even though you obtain a bankruptcy discharge, these debts are not discharged. In many instances, you can discharge income taxes owed to the Internal Revenue Service and the Massachusetts Department of Revenue. To be discharged, the taxes must be over three years old, a tax return must have been filed more than 2 years prior to filing bankruptcy and the taxes must have been assessed for over 240 days prior to filing bankruptcy.
Bankruptcy provides an effective method to get out of debt for taxes.
If your taxes are not over three years old, you may pay your tax arrears through a chapter 13 plan. The advantage to this alternative is that from the date of filing, interest and penalties cease to accrue. When you file bankruptcy, the equity in your real estate and personal property is exempt up to certain values. In Massachusetts, you may elect to use either the Massachusetts exemptions or the Federal exemptions. An exemption is equity in property that you can keep even though you file bankruptcy.