IRS and State tax debt are in many circumstances, depending on timing, fully dischargeable in chapter 7 bankruptcy. In instances where tax obligations do not fit into a chapter 7 case, we suggest a chapter 13 filing for two key reasons. First, the amount of the actual debt owed will be reduced by about 70 percent as fees, interest and penalties can no longer be assessed. Secondly, once your chapter 13 plan is confirmed, you have up to five years to pay off the tax debt through your chapter 13 plan. You will then receive a federal court order officially discharging the tax obligation which the IRS or State tax authorities cannot dispute.