Understanding Bankruptcy and Tax Debt: A Comprehensive Guide

Can Bankruptcy Help with Tax Debt?

Bankruptcy can be a powerful tool when dealing with tax debt. While it’s a common misconception that tax debts cannot be discharged in bankruptcy, the truth is more nuanced. Certain back taxes may be eliminated in bankruptcy, providing significant relief for those struggling with debt. 

When you file for bankruptcy, an automatic stay is put in place. This halts all collection efforts, including those from the IRS or Louisiana Department of Revenue. This means you can have peace of mind knowing that your wages won’t be garnished and your assets won’t be seized to pay off tax debt.

However, not all tax debts can be discharged in bankruptcy. The specifics of your tax debt, your overall financial situation, and the type of bankruptcy you file will all play a role in determining what happens to your tax debt after bankruptcy.

Chapter 13 Bankruptcy and Tax Debt

Chapter 13 bankruptcy, often referred to as a “wage earner’s plan,” allows individuals with regular income to develop a plan to repay all or part of their debts. Under this type of bankruptcy, debtors propose a repayment plan to make installments to creditors over three to five years.

If your tax debt cannot be discharged outright, Chapter 13 bankruptcy allows you to pay past-due taxes without interest. This can be a lifeline for those with significant tax debt, as it allows you to manage your debt in a way that fits your budget.

Meet Brenda and Mark: A Chapter 13 Bankruptcy Case Illustration for Dealing with Income Tax Debt in Monroe

Brenda and Mark, a married couple from Monroe, grappled with a substantial income tax debt. A series of unfortunate events, including a failed business venture and unexpected medical bills, led to a backlog of unpaid taxes. The constant pressure from the IRS and the Louisiana Department of Revenue seemed insurmountable.

Desperate for a solution and fearing the consequences of wage garnishment and asset seizure, Brenda and Mark sought the expertise of Simon Fitzgerald LLC. Our seasoned bankruptcy attorneys evaluated their unique situation and identified Chapter 13 bankruptcy as the optimal solution.

With the filing of Chapter 13 bankruptcy, Brenda and Mark immediately experienced relief as the automatic stay halted all collection efforts from tax authorities. This legal protection allowed them to regroup and plan their next steps without the looming threat of aggressive collections.

Guided by our knowledgeable attorneys, Brenda and Mark crafted a realistic repayment plan that allowed them to pay off their overdue taxes over five years without accruing additional interest. This structured approach offered a clear and manageable path to financial recovery, ensuring they could fulfill their tax obligations without sacrificing essential living expenses.

Throughout their journey, the team at Simon Fitzgerald LLC stood by Brenda and Mark, offering compassionate support, clear guidance, and expert legal counsel. We empowered them to understand their rights, explore their options, and leverage the benefits of Chapter 13 bankruptcy to regain control of their financial lives.

Today, Brenda and Mark are well on their way to financial stability, unburdened by the crushing weight of tax debt. Their successful navigation of Chapter 13 bankruptcy illustrates the transformative power of informed legal guidance and the potential for relief that bankruptcy offers.

Understanding Your Rights

Understanding your rights when dealing with tax debt and considering bankruptcy is crucial. Louisiana law severely restricts “self-help” repossession, and creditors must adhere to strict guidelines when collecting a debt. 

It’s essential to consult with an experienced bankruptcy attorney if you’re dealing with tax debt. They can help you understand your options and rights against creditors. For more information, visit the IRS page on declaring bankruptcy.


Dealing with income tax debt in a Chapter 13 bankruptcy can be intricate, and it’s normal to have questions about the process. We’ve compiled some of the most frequently asked questions about handling income tax debt in Chapter 13 to help you better understand what to expect.

Why Choose Simon Fitzgerald LLC for a Fresh Financial Start?

Dealing with tax debt can be overwhelming, but you don’t have to face it alone. At Simon Fitzgerald LLC, we’ve established a legacy of helping clients achieve a fresh financial start. Our experienced attorneys can determine if your tax debts are dischargeable in bankruptcy and help you defer those tax obligations to get the IRS or Louisiana Department of Revenue off your back. 

With our legacy guiding us, we’re dedicated to providing clear, straightforward advice and guidance. Everyone deserves a fresh financial start; we’re here to help you achieve that. Choose us to navigate your financial issues and experience the difference our legacy can make. Ready to take the first step towards a fresh financial start? Confused about which debts can be wiped out in bankruptcy? Our free guide can help. Stay informed by signing up for our newsletter. When you’re ready to start your journey, submit your details and let our experienced team guide you. Schedule your free consultation today!