How does filing for bankruptcy affect my tax debt?

Bankruptcy can help with tax debt, but the rules are complex. Chapter 7 (liquidation): certain income tax debts can be discharged if they meet ALL of these criteria: the tax return was due at least 3 years ago, the return was filed at least 2 years ago, the tax was assessed at least 240 days ago, the return was not fraudulent, and there was no willful evasion. Payroll taxes and fraud penalties are never dischargeable. Chapter 13 (reorganization): tax debt is classified as either priority (must be paid in full through the 3-5 year repayment plan) or non-priority (may be partially discharged). Most recent tax debts are priority claims. The automatic stay in both chapters immediately stops IRS collection activity (levies, garnishments, liens), giving you breathing room. However, tax liens that existed before bankruptcy survive the discharge, meaning the IRS can still enforce the lien against property you owned at the time of filing, even after the underlying debt is discharged. Bankruptcy should be considered a last resort for tax debt because: it destroys your credit for 7-10 years, not all tax debt qualifies for discharge, and other options (OIC, installment agreement, CNC) may resolve the debt with less collateral damage.