The Truth About Bankruptcy Taxes Relief

Gaining tax through bankruptcy proceedings is a complicated matter, and undoubtedly this is one reason that there is a great deal of confusion regarding this issue. If you are in a situation where you have Federal back tax issues that are due, then it is even more important to get professional help with bankruptcy, as the tax issue complicates the process even more than in a normal bankruptcy case. There must be great care taken in the process of filing for bankruptcy, to be certain that all the details are properly handled, especially when any type of taxes are to be included among the debts.

Even for professionals, it can be mind boggling to find the middle ground that allows a taxpayer to be able to file for bankruptcy taxes relief. Some of the things that must be balanced and taken into account are the IRS codes and the IRS powers and limitations to levy and lien, the US bankruptcy statues, and the rights of the US citizen. However, even with all of those considerations, there are instances that allow people to resolve their serious tax issues through filing for bankruptcy.

Filing for taxes relief though either a Chapter 13 bankruptcy or a Chapter 7 bankruptcy will cause an automatic stay to be issued. This will effectively stop all collection activities. This includes stopping bank account levying and garnishing of wages by the IRS and other creditors as well.

Once the stay is issued, the taxpayer and their bankruptcy attorney have some breathing room and time to decide how to best proceed. They can either attempt to get a discharge of the tax debt under a Chapter 7 filing, or they can reorganize the tax obligation by filing Chapter 13 bankruptcy. Which Chapter of bankruptcy is filed will depend on a number of factors, including the total amount of all the debts that are owed, the assets of the debtor and the expected future income and ability to pay under a Chapter 13 reorganization.

In 2005, the US Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This act made a number of reforms to the Federal Code governing filing for bankruptcy. One of these changes was a merging of the discharge rules that applied under a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, and a Chapter 13 bankruptcy.

The best advice is to seek good bankruptcy help if you need to seek bankruptcy taxes relief because of how complex the issue is. There is no blanket approach to dealing with taxes through filing for bankruptcy, but each case is taken on an individual basis and the circumstances of the individual are taken into account as well. As a general statement, it can be said that in most cases older tax debts can be discharged, but newer tax obligations tend to be treated much like property taxes and cannot be discharged.

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Please note that the information contained on this website is for information purposes only. We strongly suggest you seek professional advice from qualified and competent financial advisors, before making any financial decisions based on the information provided on this website. See our disclaimer for full details.

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