Many debtors use bankruptcy as a way to discharge consumer debt, but you can also eliminate certain tax debts if you meet specific criteria. The Fort Lauderdale bankruptcy lawyers at Anidjar & Levine can review your case to see if you can eliminate crippling tax debt through bankruptcy. Our attorneys offer individualized counseling in these matters. We can assess whether Chapter 7 or Chapter 13 may lift the burdens imposed by your debts.Tax Debt and Chapter 7
Many individuals prefer to file for Chapter 7 bankruptcy because of its speed. Your qualifying debts are wiped out, or discharged, within a matter of months, but you cannot discharge priority tax debts, such as tax liens. However, you may eliminate income-based tax debt in Chapter 7 if:
- It is related to a tax return that was due at least three years before you file for bankruptcy;
- The tax return was filed two years before you file for bankruptcy;
- The IRS assessed the tax debt at least 240 days before you file for bankruptcy;
- The tax return is not fraudulent or misleading; and
- There was no tax evasion on your part.
You must meet all of the above criteria to eliminate the tax debt under Chapter 7. If you cannot discharge a tax debt because not enough time has passed, for example, an experienced attorney can discuss the advantages and disadvantages of waiting to file until the debt does qualify.Tax Debt and Chapter 13
In Chapter 13, if your tax debt meets all of the above criteria, it will be treated as non-priority, unsecured debt. You will make payments to the IRS toward the debt as part of your repayment plan. The amount you pay will be lower than the amount you would otherwise pay under a payment plan with the IRS. Any debt that remains after you complete your plan will be discharged along with your other unsecured debt.
You can also make payments towards your non-dischargeable tax debts in Chapter 13. These debts are treated as priority debts and will be paid before most other debts. You can pay off these debts in full through the life of your repayment plan, which is anywhere from three or five years. You will not have to sell your assets immediately in order to pay them off.Non-Dischargeable Tax Debt
Certain tax debts are not dischargeable in either Chapter 7 or Chapter 13. These tax debts include:
- Tax liens. If the tax lien was recorded before you filed for bankruptcy, the lien stays attached to your property even if you file for bankruptcy. You will not be personally liable for the debt, but you must pay off the debt with any proceeds from the sale of the property.
- Property taxes. You cannot discharge property taxes that were incurred and owed in the year before your bankruptcy filing. If there is a lien attached to your property, the debt is considered secured.
- Any taxes you were required to withhold or collect. These include sales taxes that you were obligated to collect from consumers, which you must then pay to the government. Other examples include Medicare or FICA.
Although these debts are non-dischargeable, bankruptcy can make it more feasible for you to pay them. By eliminating or reorganizing your debt, you may be able to pay your tax debts and any other non-dischargeable debt you may have, such as student loans or child support.Offering Knowledgeable Counseling in Hollywood Bankruptcies
The lawyers at Anidjar & Levine provide capable and personalized guidance. Our Hollywood bankruptcy attorneys have represented clients with diverse financial concerns and goals. We can assess your situation, including your tax debts, to help you decide if bankruptcy is appropriate for you. We will guide you through the filing and advise you at every step of the process to help you make a fresh financial start. Call us today at (800) 747-FREE or contact us via our online form to schedule a free and confidential appointment.