Tax Debt You can discharge a tax debt in bankruptcy: You can discharge (wipe out) tax debts for income taxes in bankruptcy. IF the debt is at least three years old. To discharge your tax debt, the tax return must have been due at least three years before you filed for bankruptcy. IF you filed a tax return. Your tax return must have filed at least two years before filing for bankruptcy case. IF you pass the "240-day rule." The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy case or must not have been assessed yet. This sounds simple enough but with the many intervening events the time periods may have been extended or the statues may have been tolled or tacked making the calculation for discharge of taxes to become very intricate and complex. You can discharge a federal tax lien: If your taxes qualify to be discharged in your bankruptcy case they may still not be discharged because a bankruptcy case will not wipe out a prior recorded tax liens. A bankruptcy will however discharge your personal obligation to pay the debt, and prevent the levy of your bank account or garnishment of your wages, but if a tax lien was recorded on your property before you filed your bankruptcy case, the lien will remain on the property. Which means you will have to pay off the tax lien in order to sell the property. However, the amount of the lien can be limited or reduced to the current value of the property after taking into consideration your exemptions on the attached property. Non-dischargeable taxes: Should you have filed a fraudulent tax return or you willfully attempted to evade paying taxes your bankruptcy case will not resolve these debts for you. Taxes such as payroll taxes, trust fund taxes, or fraud penalties, can never be eliminated in bankruptcy. We are a debt relief agency. We help people file for relief under the Bankruptcy Code.