Tax Debt and Bankruptcy Protection
Taxes are burdensome for everyone. If you are so poor that you get a tax refund, the refund you get is not enough to make much of a dent in your financial hardship. If you look financially secure on paper, the IRS shatters that illusion every year when you have to pay most of what was going to be your financial cushion to the government. Truly wealthy people have the resources to engage in all kinds of machinations to reduce their tax obligations, but you do not have that kind of money. You keep telling the truth on your tax returns, and the IRS keeps charging you lots of money, piling interest charges on top of it when you are unable to pay the full amount. Medical bills are the monster that chases some people to bankruptcy court, while for others, the monster is the family court with its wage garnishments and its threats of jail time. Taxes can ruin people’s finances, too. If you are thinking of filing for bankruptcy because your taxes are too much for you to pay. Discharging tax debts in bankruptcy court is possible, but the process to do it successfully is complicated. If tax debt is such a source of stress that you are considering filing for bankruptcy, contact a Plantation chapter 7 bankruptcy lawyer.
Most Debts That Involve the Government Are Not Dischargeable in Bankruptcy
The debts that are easiest to discharge in bankruptcy are unsecured debts owed to private sector lenders. These include credit card debt, medical bills, and unsecured personal loans owed to banks or peer-to-peer lenders. By contrast, the bankruptcy court cannot discharge financial obligations that other courts ordered you to pay. Therefore, it cannot discharge criminal fines or civil fines that you incurred by breaking the law. It also cannot discharge alimony or child support debt; if you cannot pay your overdue alimony or child support, the way to resolve this is to petition the court to reduce your alimony or child support obligations retroactively.
It Is Sometimes Possible to Discharge Tax Debt, but Only If You Keep Track of Multiple Timelines
It is not impossible to discharge tax debt in bankruptcy court, but the court will only accept your request to discharge it if you follow the timeline correctly. The tax debt you are trying to charge must be at least three years overdue; in other words, it must be for a tax year that was at least three years ago. Furthermore, you must file the tax return for the year whose debts you are trying to discharge at least two years before you file for bankruptcy, even if you filed it late. For example, if you filed your 2020 tax return in 2024, you cannot discharge its overdue taxes until 2026.
Work With a Debt Lawyer About Tax Debt and Bankruptcy
A South Florida debt lawyer can help you file for chapter 7 bankruptcy protection if you are struggling with tax debt. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.
Source:
irs.gov/businesses/small-businesses-self-employed/declaring-bankruptcy
