Tax Debt and Bankruptcy, What you Need to Know
One of the most frequent questions we hear from clients, especially at this time of year, is “Can bankruptcy discharge my tax debt?”, or to phrase it another way, “does bankruptcy cover tax debt?” Like most financial and legal matters, it’s important to look at things a bit more carefully rather than simply offering a quick yes or no.
The quick answer is that it depends. However, when a series of specific criteria or met, then tax debts may be discharged by filing for chapter 7 bankruptcy.
The range of conditions include issues such as timing, whether or not you filed your tax return for the taxes in question, if there were any reported issues of fraud, what types of taxes are owed, and more. An experienced bankruptcy attorney will be able to guide you through that list of conditions to see if your taxes will be discharged by filing for bankruptcy.
Even if the answer may be no, filing chapter 7 or chapter 13 bankruptcy may still prove to be beneficial for many individuals. With chapter 7, other debts can be discharged, removing further obstacles and financial burdens, and allowing you to focus more on paying off those back taxes.
With chapter 13, payment plans are created to provide you with a more manageable and realistic load to pay off taxes, penalty free, and often, interest free. This may give you the flexibility, peace of mind, and financial freedom your looking for even if all the taxes may not be eligible for discharge.
If you’re facing financial burdens including back taxes, bankruptcy may be the solution. Call 301.977.4300 to schedule a free consultation and we’ll begin discussing your case and determining what may be the best course of action for you. Our experienced attorneys are waiting to provide you with the assistance you need to move ahead.