Bankruptcy

Bankruptcy Discharge of Credit Card Debt Used to Pay Taxes

By Jonathan Alper

A caller asked me if he could discharge in bankruptcy a credit card charge of $10,000 used to pay property taxes on commercial real estate. The general rule is that all credit card debt and other unsecured debts are dischargeable in Chapter 7 bankruptcy. However, Section 523 of the Bankruptcy Code provides for exceptions. One the exceptions is certain income tax and property tax which are "priority" debts. The Bankruptcy Code does not permit a debtor to discharge credit card debt incurred to pay non-dischargeable taxes. In other words, the Code does not allow people to convert non-dischargeable property tax or income tax into unsecured credit card debt to be wiped out as part of general unsecured debts.

Full post as published by Florida Bankruptcy Law on December 20, 2007 (boomark / email).