Determining When State Income Taxes Are Dischargeable Under Chapter 13
Saturday, September 5th, 2009Let’s say you file a Chapter 13 bankruptcy petition in a given year. You state in your petition that you owe state income taxes for the previous year and give an estimate of that amount. The bankruptcy court confirms your plan. You then file your state income tax return, showing you owe even more than you stated in the plan, and you don’t pay the taxes. You successfully complete the plan over the next few years. The bankruptcy court issues a discharge order, declaring you free of all debts under the plan. Everything seems fine: you’re ready to put your troubled financial past behind you and move on with your new life.…