Most often individuals enter into a bankruptcy because they are being threatened with legal action from their creditors. They may be at risk of losing their home, or having their vehicle repossessed. Once the financial problems get to this point then the individual has to take action quickly to stop the legal proceedings.
To qualify for a bankruptcy you have to complete a means test. This determines whether you quality for the chapter 7 or chapter 13 bankruptcy. It may be that you are the only one that is filing for bankruptcy relief which means your spouse isn't.
Going bankrupt is not something that you should jump into quickly. You want to give it a great deal of thought and think about what other options may be available to you. At the same time it is a resource that you want to consider if you are in a tight financial situation.
It is not uncommon for many people to want to go bankrupt simply because they are burdened with all of the collectors that may be harassing them. Before making this decision the first thing an individual should do is check their credit score. This may not directly affect the situation that is leading one into a bankruptcy but it can help them prepare for their new financial future after their bankruptcy has been processed.
In a Chapter 13 bankruptcy tax debt is handled a little differently. In most cases you will end up having to repay any of your tax owed while your Chapter 13 repayment plan remains in place. How much you will have to pay is decided by whether it becomes classed as a priority or non-priority or unsecured claim. Any debt that is classified as a priority debt in the Chapter 13 has to be paid in full throughout the bankruptcy plan.
Bankruptcy can help with some tax debt but not all of it. For those that are going into a Chapter 7 bankruptcy, the tax debt that can be discharged is only that which is income based and applies to federal or state taxes or gross receipt taxes.
Many times when an individual files for bankruptcy it ends up that they qualify for a Chapter 13 bankruptcy. This is also a good form of debt relief. Rather than having all or most of the debts discharged, it allows for a debt repayment plan. It entails comprising a plan for paying the debts owed and the payments are monitored by the bankruptcy trustee.
Most people only decide to go bankrupt as their last resort. A lot of people try to reach some type of debt settlement rather than going the bankruptcy route. This can have some tax implications to it that you really need to consider before making a decision on debt settlement. You also may be in a position where you had a debt and the debt was written off after a few years. You now believe you are free and clear financially regarding this debt, but you may soon find out that it has some tax implications to it.
Many individuals hate the thought of going bankrupt but even detest it more around the festive season. It is a really stressful time because many individuals want to be able to do some gift buying, but their finances are in such a bad state that this makes it most difficult for them. It is important not to run up the credit cards just prior to going bankrupt based on the thought that they are going to be discharged anyway. This can have some detrimental effects on the outcome of your Kentucky bankruptcy.