Not all tax debt can be discharged through a bankruptcy proceeding. But some can. Determining what may be eligible for such action is something that individuals in Arkansas considering possible bankruptcy, whether it is under Chapter 7 or Chapter 13 of bankruptcy laws, should be discussing with an attorney experienced in this area of law.

To fit the bill for discharge eligibility tax debt has to meet certain criteria. Here are some of the standards:

  • The debt must be for income taxes.
  • It must be at least three years old.
  • Proper tax returns must have been filed for the years being cited.
  • The filing must come at least 240 days after the liability was assessed.
  • There can be no tax fraud on the part of the petitioner.

Other taxes may be eligible for discharge under bankruptcy at the state level, but that depends on the circumstances and the laws of that state.

All the requirements having been met, it may be that the right road to follow is Chapter 7 bankruptcy protection. That appears to be the situation behind a recent decision by singer Dionne Warwick.

She filed a Chapter 7 petition in New Jersey recently. Based on the reports of her case, it appears that her main objective is to resolve long-time issues related to federal income taxes and business taxes in California. Her documents indicate that she owes somewhere in the neighborhood of $10 million in tax liabilities. Most of it is being sought by the Internal Revenue Service. About a third of it represents what California is seeking.

Many may know Warwick for her many hit songs. She was really big in the 1970s and 80s. In the 1990s, though, she appears to have run into some issues. Her publicist says she became the victim of bad managers between 1991 and 1999 and tax bills began to mount.

The spokesperson says the 72-year-old artist has made good on the past tax bills and that the amount now owed represents penalties and interest. He says those have accrued over time as Warwick’s efforts to come to workable terms for payment have met with failure.

With all other options exhausted, Warwick is now turning to Chapter 7 bankruptcy for relief.

Source: WLS-TV, “Dionne Warwick Bankrupt: Singer files Chapter 7 petition,” Associated Press, March 26, 2013