Tucson, Arizona Bankruptcy Blog

The I.R.S. only allows people to discharge tax debts in bankruptcy in limited situations. Whether you can discharge a tax debt depends on a variety of factors, including whether you are filing for Chapter 7 or Chapter 13 bankruptcy.

Discharging Tax Debt in Chapter 7 Bankruptcy

A debtor can discharge tax debt through Chapter 7 bankruptcy if he or she meets the following criteria:

• The debt is for income taxes only - people may not discharge other types of tax debt, such as payroll tax debt or penalties for tax fraud
• The debtor filed tax returns for the debt at least two years before filing for bankruptcy
• The debt was due at least three years prior to the date the debtor filed for bankruptcy
• The I.R.S. assessed the tax debt at least 240 days before the debtor filed the bankruptcy petition
• The debtor did not file fraudulent tax returns by including information intended to mislead the I.R.S.
• The debtor did not commit tax evasion with such acts as changing a Social Security number or name on the tax return, filing an incomplete return or hiding assets

A case recently heard by Arizona's highest court could have serious implications for many families who are on the verge of losing their homes. The dispute reflects issues that are being resolved in state courts nationwide regarding lenders who take shortcuts at the expense of legal formalities when foreclosing on borrower's homes.

Tucson homeowner Julia Vasquez has challenged a foreclosure notice issued by Deutsche Bank National Trust Co., alleging that the company's failure to record a deed transfer after acquiring the mortgage from Saxon Mortgage, Inc., and then seeking to foreclose is a violation of Arizona real property law. Among those who have spoken up for the rights of property owners in this case is Arizona Attorney General Tom Horne, who has stated that a bank that does not properly record its deed interest before a foreclosure sale is breaking the law.

A 2010 study from the University of Michigan Law School paints a dismal picture for Americans over age 65: Seniors are the fastest-growing group of Americans filing for Chapter 7 or Chapter 13 bankruptcy.

It doesn't take a rocket scientist to figure out why this is: the cost of living is increasing while income is decreasing. With 401(k)s and other retirement pensions plummeting and no foreseeable increase in Social Security payments, seniors must try to live on much less than they bargained for while also facing large mortgages, numerous medical bills and other necessary costs.

Add credit card debt to the equation, and you have a significant problem. In fact, the same study found that Americans over 65 have more credit card debt than other age groups - 50 percent more.

If you are a senior facing financial difficulty, or your parents are going through rough times, speak with an experienced bankruptcy lawyer to learn how bankruptcy can help the elderly.

Through a reaffirmation agreement, a debtor agrees to pay back part or all of a debt that he or she could otherwise have discharged through bankruptcy. A type of settlement agreement, reaffirmation agreements are allowed under federal law (11 U.S.C. § 523), which lists the exceptions to discharge.

Individuals filing for bankruptcy choose to sign reaffirmation agreements for many reasons. One of the main reasons is keeping a motor vehicle - a reaffirmation agreement says that you will pay back the debt in order to keep your car.