The thought of falling behind on your tax returns and having the government hound you overpayments is enough to make anyone nervous. Unfortunately, for many people, this is the reality they face. You may be getting official notices threatening all types of serious legal actions. While bankruptcy is not a cure-all for eliminating these types of debts, it can provide some relief and give you the breathing room you need to address the situation.
Bankruptcy can eliminate certain types of tax debts, but it will not completely resolve any ongoing problems you have with the Internal Revenue Service (IRS). In a Chapter 7 bankruptcy, you can surrender certain assets in order to get rid of secured debts, such as car loans, while getting relief from unsecured debts, such as credit card balances. You may also be able to eliminate federal income tax you owe, providing you meet certain qualifications. These include:
It is important to be aware that even if you are eligible to eliminate federal income taxes through bankruptcy, you will still owe any fines, penalties, or interest the IRS may assess. It will also not eliminate any federal liens against you, although it can temporarily halt legal action and prevent the IRS from garnishing your wages.
Under the bankruptcy laws that govern U.S. Courts, an automatic stay goes into effect once you file. This prevents creditors from taking actions against you, such as repossessing property or taking you to court, while your bankruptcy case is being resolved. This can provide some breathing room if you face these types of actions as the result of tax debts.
Filing bankruptcy for past due taxes can also benefit you by eliminating other types of debt. By freeing up what income and resources you do have available, you are in a better position to resolve your issues with the IRS through a payment plan or other arrangements.
If you have questions about tax debts and the options available, the Law Office of Karen E. Evangelista, P.C. is here to help. To request a free and confidential consultation to discuss your concerns, contact our Rochester bankruptcy attorney today.