Can Bankruptcy help with back taxes?
For most people, taxes are the biggest financial obligation they face every week, month and year. Taxes are deducted from our paychecks and we must file returns every spring to determine our total tax obligation for the year. Many people find that even after the withholding process, they still owe money when the spring returns are filed. If you find yourself in this situation, you may be wondering: “What Happens Next”?
Typically, the IRS or the Department of Revenue will send a letter demanding payment, and will persist in these demands as long as the taxes remain unpaid. The IRS or Department of Revenue may assess fees, penalties, and interest as they demand larger and larger amounts to satisfy the debt. The amount demanded by taxing authorities may be too high for many of us to pay, especially if we already have unmanageable debts. This may lead to a second question: “What should I do about my tax balance?”
The great news is that bankruptcy is a tool to help. The automatic stay prevents the IRS and Department of Revenue from directly billing or garnishing income taxes owed prior to filing bankruptcy while your bankruptcy is active. The bankruptcy process can also be used to settle the actual tax balance, either by repayment or, in some cases, by eradicating them completely through the bankruptcy discharge.
There are many factors that go into determining if a tax debt can be discharged, including the amount of taxes owed, how old the debt is, and when the tax returns were filed. Your attorney will inform you of the standard that the court uses to make this decision and help you determine which chapter of bankruptcy is most beneficial for you. Whether or not a tax debt is dischargeable by bankruptcy, it can still help you to resolve the problem.
A Chapter 13 bankruptcy filing is one of the most effective ways to achieve this. Certain taxes can be repaid via the bankruptcy plan without ongoing interest or penalties. This plan, like all Chapter 13 plans will be tailored for your specific financial situation and structured to meet your individual needs. Your attorney will help you determine the best way to resolve any outstanding debts using the bankruptcy process. Receiving a notice from the IRS, or Department of Revenue, can be a bit frightening. It can leave you wondering what options there are to resolve the situation. This is not something you have to face. Our firm is experts at navigating the bankruptcy process.
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When the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to
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