Yes, your neighbor is correct. Income taxes are treated in several ways. Often, if a tax liability is over three years old and you have filed the tax returns on time, you can wipe out the tax liability in a Chapter 7 or a Chapter 13.
If it is determined that the tax in non-dischargeable, you can often pay the tax liability back through a Chapter 13 and extend the amount over the life of the plan. For example, $3,000 can be paid back in a 48 month plan at only $62.50 per month, with no interest and penalties.
