What Happens to My Tax Debt in Bankruptcy?

It is not uncommon for a bankruptcy filer to have outstanding state or federal tax debt.  As is commonly known, tax debt is not dischargeable through either chapter 7 or chapter 13 bankruptcy.  In a chapter 13 case (at least in Utah), the bankruptcy filer will have to pay all of the outstanding tax debt through the 3-5 year plan.  Since there is no repayment plan in a chapter 7, filers under this chapter will need to work with the State or the IRS to arrange a payment plan or negotiation either before or after the bankruptcy.  Since tax debt is priority debt, if there is money that comes out of the liquidation of the filer's assets, these tax creditors would be the first to get paid.  However, since so many chapter 7 cases yield no return to creditors, most filers are faced with ongoing arrangements with the tax agencies in order to pay back these nondischargeable debts.Adam Brown is a bankruptcy attorney for Dexter & Dexter, a debt relief agency helping people file for bankruptcy.