Filing for chapter 7 bankruptcy is a big move and one that should be made only after careful consideration. One primary area of concern is how much of your debt can be eliminated with a filing. After all, if you are to make the most of the filing at your bankruptcy law firm, it pays to know what can be included. Tax debts are one of those confusing areas when it comes to what can and what cannot be forgiven with a chapter 7 filing. Read on to find out more about how the IRS rules and the bankruptcy codes could affect your case.
How Bankruptcy Views Tax Debts
It can be a revelation to some filers when they realize how their personal financial situation has suddenly become the business of the bankruptcy trustee after a filing. When you file, you are actually allowing the bankruptcy trustee to oversee your finances by making decisions about what you owe and what debts can be forgiven. If you owe on taxes, you must list them on your debt matrix, right alongside your car loan and credit cards debts. Debts are then assigned a priority rating by the bankruptcy trustee. As you can well imagine, the IRS has a very high standing when it comes to who gets paid first. That means that most, if not all, of your tax debts have to be paid by you. You may have a short grace period during the bankruptcy process, but the debt remains after the bankruptcy is final. If you are entering bankruptcy with a lot of tax debts, your financial situation might only improve marginally once you are out of bankruptcy.
Some Tax Debts Can be Forgiven
Don't lose hope, however. If your tax debts are old enough, they could be forgiven. The rules about the discharge of tax debts are strict and every one of the below requirements have to be met to have them forgiven:
Taxes and bankruptcy are complex issues and may require the expertise of a bankruptcy lawyer.
Thank you for visiting my website. My name is Melanie. I am a 31-year-old woman who recently found myself unable to pay my bills following a devastating divorce. I created this website because I know there are a lot of misconceptions out there about filing for bankruptcy when you have student loans. I read about many of these misconceptions when doing my own research. Ultimately, I hired an attorney who helped me learn the truth. If you have loans, you may be able to get them discharged, though it is challenging and rare. If you are drowning in debt and have student loans as well, I hope my website helps you learn about bankruptcy and how student loans may affect it.