Debts discharged through bankruptcy are not considered taxable income. If you are an individual debtor who files for bankruptcy under chapter 7 or 11 of the Bankruptcy Code, a separate “estate” is created consisting of property that belonged to you before the filing date. This bankruptcy estate is a new taxable entity, completely separate from you as an individual taxpayer. Please note, however, that some tax debts are not dischargeable in a bankruptcy action. For more information, see Publication 908, Bankruptcy Tax Guide. A bankruptcy filing generally stops enforcement action (i.e., levy) and suspends the statute of limitations to collect. The running of the collection period is suspended during the time the bankruptcy is pending. Generally, a bankruptcy is pending from the time a petition is filed to the date the bankruptcy is discharged, dismissed, or closed. Further, the running of the collection period is extended for an additional 6 months upon the conclusion of the bankruptcy. Refer to Statutes of Limitations for Assessing, Collecting and Refunding Tax. Return to What If?