Bankruptcy is a way to get rid of tax debt. But it should only be explored as a last option. It won’t automatically fix your IRS problems and will affect you and your family. There are several possibilities to consider. Click here to read or watch more IRS Help resources.
There are 2 basic kinds of bankruptcy: Chapter 7 (straight bankruptcy) and Chapter 11, 12, or 13 (repayment plans). Chapter seven helps you to liquidate your debts. You can pay some but not all debts with a payment plan through Chapter 11, 12, or 13 bankruptcy.
To qualify for a Chapter 7 bankruptcy, you have to meet these 5 criteria:
Tax return filing due date is at least 3 years old prior to filing for bankruptcy
Tax return was filed a minimum of 2 years prior to filing for bankruptcy
Tax assessment is at least 240 days before filing for bankruptcy
Tax return was not fraudulent
Taxpayer was not guilty of tax evasion
It’s also important to take note that not all tax debts are eligible to be discharged. Obviously, unfiled tax returns can’t be discharged. Before your case can be heard before the creditors’ meeting, you should have filed your tax returns from the past 4 years. Provide a copy of your most recent tax return to the bankruptcy court and to your creditors.
You have to be prepared for the long term repercussions of bankruptcy on you and your family. It will remain on your credit report for as long as 10 years. This would hinder your ability to obtain loans, establish new lines of credit, lease an apartment, or even change employers, in some cases.
Filing for bankruptcy is a complicated process and changes are being considered, but all the same, seek an experienced counsel beforehand.
Although not a Bankruptcy Attorney, Tampa Tax Attorney consults with clients all over the United States in the area of IRS Problem Resolution including Tax Bankruptcies. Why not give him a call for a Free Consultation at (888) 438-6474?