Tax debt can be one of the most stressful financial burdens to manage. Many people struggling with unpaid taxes wonder if bankruptcy could help them find relief. While not all tax debt can be erased, certain types may qualify for discharge under specific conditions. At the Law Office of Calvin Craig, we help Raleigh residents understand how bankruptcy laws apply to tax obligations and whether filing could provide the financial reset they need.

When Tax Debt May Be Dischargeable

Bankruptcy can discharge income tax debt in North Carolina if it meets the following requirements:

1. The taxes are at least three years old. The return must have been due at least three years before you file.
2. The tax return was filed at least two years ago. You must have filed your own return, not one filed by the IRS.
3. The tax assessment is at least 240 days old. The IRS or state must have assessed the tax at least 240 days before filing.
4. No fraud or willful evasion occurred. Bankruptcy only discharges honest tax debts—not those involving fraud.

When these criteria are met, Chapter 7 bankruptcy may eliminate the qualifying tax debt entirely. In contrast, Chapter 13 bankruptcy can help you set up a manageable repayment plan, potentially reducing penalties and interest.

Debts That Typically Cannot Be Discharged

Certain tax debts remain after bankruptcy, including:

• Payroll or trust fund taxes
• Recent income taxes that don’t meet time requirements
• Tax liens already placed on your property

Even if your taxes cannot be fully discharged, bankruptcy can still offer relief by stopping collection actions, wage garnishments, and interest accumulation while you reorganize your finances.

Discuss Your Options With a Raleigh Bankruptcy Attorney

Bankruptcy laws are complex, and determining whether your tax debt qualifies for discharge requires careful review of your financial and tax history. The Law Office of Calvin Craig can help you understand your options and guide you through the process toward financial stability.