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Frequently Asked Questions Regarding Bankruptcy:Q. Can unpaid federal, state or local taxes be discharged in bankruptcy?A. In many cases yes. Certain taxes are dischargeable in a Chapter 7 or Chapter 11 bankruptcy or as part of a Chapter 13 plan. Q. Are sales taxes, excise taxes, property taxes, or payroll withholding and employer’s taxes dischargeable in bankruptcy?A. Payroll taxes, social security taxes, sales taxes, and personal income taxes arising less than three (3) years prior to the bankruptcy filing are generally not discharged in bankruptcy. Q. Does the liquidation of a partnership in bankruptcy discharge the partnership liabilities?A. No. Q. Are the individual partners liable for the remaining debts of the partnership?A. Yes. The individual partners are equally liable for the debts of the partnership, including any tax claims against the partnership. Q. Are the individual partners liable only to the extent of their partnership interest?A. No. The individual partners are jointly and severally liable for the unpaid debts of the partnership. Q. Does the filing of a Chapter 7 bankruptcy case by a corporation discharge its debts?A. No. Only individuals may receive a discharge under Chapter 7. Q. Can partnerships and corporations discharge their debts in a Chapter 11 case?A. Partnerships and corporations may obtain a discharge in a Chapter 11 case if the company stays in business following the reorganization. Q. Can a partnership or corporation discharge their debts in a Chapter 13 case?A. No. Partnerships and corporations are not eligible to file a petition under Chapter 13. Q. Can taxes be discharged in an individual’s Chapter 13 case.A. With the exception that all priority taxes are paid, a Chapter 13 discharges the debtor of all taxes. Q. What are "priority taxes?"A. Priority taxes are defined as unsecured claims for personal income taxes for years less than three (3) years old; trust fund taxes; excise taxes under three years old; employment taxes less than three years old; and certain other categories of taxes. Q. Is it possible to discharge certain taxes in a Chapter 7 bankruptcy and pay the others in a Chapter 13 plan?A. Yes. With careful planning and under the right circumstances an individual can discharge certain taxes in their Chapter 7 bankruptcy case and partially discharge other taxes in a Chapter 13 case. Q. What is a "Chapter 20" bankruptcy?A. Bankruptcy attorneys often use the term "Chapter 20" to describe a case where an individual has filed a Chapter 7 case and then subsequently files a case under Chapter 13. As mentioned above, an individual may file a Chapter 7 and a Chapter 13 case to handle debts that were nondischargeable under Chapter 7. There are no "Chapter 20" provisions in the United States Bankruptcy Code. It is simply a term used by bankruptcy practitioners to refer to the sum of the 7 and 13. Q. Do the criteria for discharge of taxes in Chapter 7 apply to all tax obligations, whether federal, state, or local?A. Yes. Q. What are the criteria for the discharge of taxes in Chapter 7?A. The criteria for discharge of income taxes in Chapter 7 are as follows: (1) taxes must be for personal income taxes,
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