Part I of this series discussed the statutory framework for determining whether Georgia individuals may discharge their income tax liabilities along with their other debts in a Chapter 7 bankruptcy case. That framework may be viewed as a two-part test; the first part, an objective test, is whether the timing rules discussed in Part I are satisfied.
The second part of the dischargeability framework is a subjective test and is set forth in Section 523(a)(1)(C) of the Bankruptcy Code, which provides that a tax liability is not dischargeable if the debtor “made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.” Section 523(a)(1)(C) only becomes an issue in a Chapter 7 case if the Internal Revenue Service or other taxing authority raises it in an attempt to prevent a Georgia debtor from discharging their tax debt. In that event, the bankruptcy judge would decide whether the taxes are discharged.
There is a broad range of actions and conduct by debtors that may be found to violate the subjective test. Any effort by a debtor to hinder the actual assessment of taxes, such as the filing of fraudulent tax returns, or extensive delay or failure to file tax returns, may render a debtor’s tax liabilities nondischargeable. Likewise, any attempt by a debtor to hinder the taxing authority’s collection of assessed tax liabilities, such as taking efforts to conceal or transfer income or assets, may also render tax debts nondischargeable.
Since 1986, The Rothbloom Law Firm has represented Atlanta, Georgia individuals seeking relief from their federal and state tax debts. Our attorneys are experienced at assessing whether a debtor’s tax liabilities can be reduced or eliminated in Chapter 7 cases, and are also experienced and equipped to litigate dischargeability disputes with the taxing authorities. Contact us today to discuss whether bankruptcy may allow you to receive a fresh start from your tax and other debts.