Former NFL star Bill Romanowski recently filed for bankruptcy after getting a bill from the IRS for back taxes estimated at $15.5 million in delinquent payments. The bankruptcy will afford the NFL star an automatic stay, which will halt the IRS’s lawsuit against him. He and his wife filed for bankruptcy on Monday, a day before a scheduled hearing that the Department of Justice brought against them in June. The lawsuit alleges that they owe $15.5 million in back taxes. Romanowski and his wife are accused of failing to pay millions in taxes as far back as when the star was still playing in the NFL. 

He is also accused of using money from his business Nutrition53 to pay for personal expenses for their family. The couple allegedly used the money Nutrition53 accounts to pay for visits to the hair salon, nail salons, rent, and day spas. Nutrition53 filed for Chapter 11 bankruptcy in August. 

Can you use Chapter 7 bankruptcy to discharge back taxes?

The majority of tax debts cannot be eliminated in bankruptcy. However, there are some cases where tax debt can be eliminated in Chapter 7. These include:

• When the debt is federal or state income tax debt – Other tax debts such as fraud penalties or payroll taxes, cannot be eliminated through bankruptcy. If your debt is a regular tax payment, you may be able to eliminate it in bankruptcy.
• You did not willfully evade paying taxes or file a fraudulent return – Your actions must have been lawful for the courts to consider a bankruptcy discharge.
• Your tax debt is at least three years old – The original tax return must have been due at least three years prior to effectively file for bankruptcy.
• You filed a tax return at least two years before filing for bankruptcy – To eliminate a tax debt in bankruptcy, a return for that debt must have been filed. If you filed late or did not file at all, you cannot eliminate the tax debt. 
• The tax debt must have been assessed by the IRS 240 or more days before you file for bankruptcy – Known as the “240 day rule.”

Further, bankruptcy cannot eliminate liens that have been placed on your property to recover delinquent taxes. A tax lien is a legal judgment secured against a taxpayer’s property to satisfy a tax obligation that you owe to either the State of Indiana or the IRS. Even if you qualify to have your taxes discharge under the harsh rules afforded by the IRS, filing for bankruptcy cannot eliminate a tax lien. 

Talk to an Indiana Chapter 7 Bankruptcy Attorney Today

While filing for bankruptcy may not be able to eliminate tax debt or money owed to the IRS, you are still entitled to an automatic stay, which halts all creditors’ actions against you while your bankruptcy is being processed. Call Chris Arrington today to schedule an appointment, and we can begin discussing your options right away.