Chapter 13 bankruptcy allows individuals and small business owners to repay their creditors over 3 to 5 years. Chapter 13 bankruptcy is available to wage earners, self-employed and sole proprietors. If you owe taxes to the IRS and/or Franchise Tax Board, they will be listed as a creditor in your bankruptcy case. The tax agency that you owe money to will receive electronic notices about your case from the U.S. Bankruptcy Courts.
As a Chapter 13 bankruptcy debtor you must:
- file all required tax returns for tax periods ending within four years of your bankruptcy filing.
- continue to file, or get an extension of time to file, all required returns.
- should pay all current taxes as they come due.
Failure to file your returns and pay current taxes during a Chapter 13 bankruptcy may result in your case being dismissed, converted to a chapter 7, or if the chapter 13 plan has not been confirmed yet, the case may be dismissed.
More information:
IRS’ Declaring Bankruptcy webpage
Publication 908, Bankruptcy Tax Guide
Publication 5082, What You Should Know about Chapter 13 Bankruptcy and Delinquent Returns
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