You can discharge federal income taxes in Chapter 7 bankruptcy only if all of the following conditions are true:

• The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy.
• You did not commit fraud or willful evasion. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, such as using a false Social Security number on your tax return, bankruptcy can't help.
• The debt is at least three years old. To eliminate a tax debt, the tax return must have been originally due at least three years before you filed for bankruptcy.
• You filed a tax return. You must have filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.
• You pass the "240-day rule." The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet. (This time limit may be extended if the IRS suspended collection activity because of an offer in compromise or a previous bankruptcy filing.)

IDespite the foregoing, you cannot discharge a federal tax lien.  If your taxes qualify for discharge in a Chapter 7 bankruptcy case, your victory may be bittersweet. This is because bankruptcy will not wipe out prior recorded tax liens. A Chapter 7 bankruptcy will wipe out your personal obligation to pay the debt, and prevent the IRS from going after your bank account or wages, but if the IRS recorded a tax lien on your property before you file for bankruptcy, the lien will remain on the property. In effect, this means you'll have to pay off the tax lien in order to sell the property.

 

Consumer debt is a catch all phrase for debt such as credit cards, store credit, or other similar forms of debt.  This debt is the easiest form of debt to discharge, since generally it is not secured by any piece of property, in the manner that a car loan is secured by the car.  Unsecured debt has the lowest priority in a bankruptcy.

Personal loans are loans between individuals.  Personal loans may or may not be garanteed by particular assets.  If they are, then the loan has a priority interest in the asset.  However, if the personal loan is not guanrateed by any particular asset, then the loan is unsecured and has the same priority as consumer debt.

Costly illnesses trigger about 46% of all bankruptcies according to a recent Harvard University study. Most people who file bankruptcy had insurance, just not enough to cover the debt. The study provides that seniors and women are hit the hardest.

Increasingly, people are choosing against home equity loans or dipping into any retirement they may have and instead choosing bankruptcy. Out of control medical bills are a primary reason bankruptcy laws are in place. If you don't want to continue working another 10 or 20 years or staying on a "budget" that does not allow you to live and eat properly, consider bankruptcy instead. With bankruptcy, you don't have to lose the equity in your home or postpone retirement.

Can you file a “medical bankruptcy” just to deal with the medical debt?

The short answer is that you can’t just deal with the medical debt. The Bankruptcy Code doesn’t treat medical debt differently from credit card, car loan or mortgage debt. All debt is treated the same. There is no provision for a “medical bankruptcy.” But wait–this doesn’t mean that bankruptcy can’t still be a solution to a medical debt crisis.

These loans are secured by the underlying asset, i.e. the auto, the boat, the motorcycle, the 4 wheeler and so forth.  Discharge of the loan necessarily means returning the underlying asset that guarantees the loan.  Nevertheless, if the filer either feels strongly about keeping the asset, or the filer believes he/she can financially afford the payment after discharge, then the filer can reaffirm the debt and continue to pay the debt and continue to own the asset.