It’s commonly thought that taxes owed to the IRS are not dischargeable in bankruptcy. F. Lee Bailey (former attorney for OJ Simpson) and his attorneys, however, filed a case that proved this assumption wrong. The 83-year-old Bailey had a dispute with the IRS over the total amount of his income from 1993 to 2001 that resulted in an unpaid tax bill of $5 million. This year, he filed for bankruptcy in the state of Maine to have the debt discharged. “At 83, it’s a little late to raise that kind of money overnight. It’s been a long battle,” he told the Press Herald in Portland, Maine.
“Quite often income tax debt can be, and is, discharged through the filing of a bankruptcy case,” said Kevin Bambury, attorney, Jeffrey Freedman Attorneys, PLLC. “There are a number of qualifications that must be met for the tax debt to be discharged, but in most cases the client can meet the criteria.”
Usually, the income tax due has to be three years or older and the taxpayer must have properly filed returns each year. In Bailey’s case he had filed and paid his taxes on time for the years after 2001 – the years for which the IRS taxes and penalties were assessed. There are other factors to consider as well and consulting a bankruptcy attorney is a good place to start.
“A good bankruptcy attorney can analyze the facts of any case and give a potential bankruptcy client an understanding of whether or not any particular income tax debt would qualify for a bankruptcy discharge,” Bambury said.
F. Lee Bailey served as one of OJ Simpson’s attorneys during the former NFL star’s 1995 trial for the 1994 murders of his ex-wife, Nicole Brown Simpson, and her friend Ronald Goldman. The trial ended with Simpson being acquitted of the crimes.