Please help the Newbie!

I just registered because I need info...

The state (VA) says that my DH owes over $5000 in taxes from 1994, 1996, and 1997. We found out about this last year.

According to the only records we have (right now), his earnings do not justify that amount in state tax. It is my understanding that no interest or penalties were applied.

Today, I received a notice that the state has "confiscated" (for lack of a better word) my/our federal tax refund.

I am preparing to file the "Injured Spouse" claim form, and to try to sort this mess out.

However, here are my questions:

1. If we decide to have him file for bankruptcy, will his state tax debt be written off?

2. How will his bankruptcy affect MY credit?

Thanks in advance for any help and advice!

You cannot discharge tax debt, not state or federal. Should your husband decide to go ahead and file bk, your credit shouldn't be affected unless you are on joint cc accounts. Of course you husband should not be continuing to use those cc's either. If you are an authorized user on any account of his, he needs to remove you from them otherwise your credit might be affected. I am not sure how it works on a mortgage/car though, but you should be fine. Maybe someone else can come along and clarify things a bit better.

You cannot discharge tax debt, not state or federal. ... Maybe someone else can come along and clarify things a bit better.
Actually you can discharge federal income tax debt in Ch 7 and Ch 13 bankruptcy *IF* the debt meets all five of these rules:
- The due date for filing a tax return is at least three years ago.
- The tax return was filed at least two years ago.
- The tax assessment is at least 240 days old.
- The tax return was not fraudulent.
- The taxpayer is not guilty of tax evasion.

Another requirement is the IRS cannot have filed a prior tax lien on the assets you own. If they have, then the lien survives bankruptcy, which means that the government may still seize your property to collect the discharged tax debts.

See these websites for more specific details about taxes in bankruptcy:
http://www.moranlaw.net/taxes.htm
http://www.nolo.com/article.cfm/ObjectID/10F6EE20-330C-4EA4-9D57FB17273DFFE7/catID/575C3BE9-F0C1-448E-B5F43D22FE36E9F2/213/161/176/ART/
http://bankruptcy-law.freeadvice.com/consumer_bankruptcy/federal_tax_debt.htm
http://www.friedlaw.com/articles/tax-tolls/discharge-taxes-bankruptcy.asp

HTH!