Bankrupting Credit Cards

Today TaxMama hears from Maria in California who is concerned .

“My husband and I are considering filing for bankruptcy.
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Can we be prosecuted for going bankrupt on a credit card we used to pay our taxes with a couple of years ago?

Dear Maria,

Bankruptcy is a tough situation for anyone.

I am sure you wouldn’t be doing this if you had a choice.

As you’re aware the bankruptcy laws were tightened up a couple of years ago specifically because the credit card industry was so upset about people running up charges, then bankrupting them.

However, if you charged those tax expenses on your card more than two years ago, you should have no problem.

Even if the charges were recent, you wouldn’t be prosecuted. Your ability to discharge those expenses would be limited.
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Or you may be forced into reorganization instead of bankruptcy.

You can learn more about the rules at the US Bankruptcy court site. They have a Bankruptcy Basics page.

Actually, this was a smart strategy. You paid off your taxes so you don’t have IRS or your state as a creditor. That’s one less thing to haunt you when bankruptcy is over. I hope it all works out for you.

And remember, you can find answers to all kinds of questions about tax bankruptcy and other tax issues, free. Where? Where else? At

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