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.
When it comes to the non priority or unsecured tax debts most likely you will only have to pay a certain amount of what is owed. The tax debt that is classified as non priority will be included with your unsecured debts and these will get paid off after your priority and secured debts have been handled. There are specific criteria that the tax debt must meet in order to be classified as a non priority or unsecured debt. The criteria is basically the same as that which is used in the Chapter 7 bankruptcy
While many people don’t favor the Chapter 13 bankruptcy because it’s a repayment plan, one of the advantages is that any tax debts that have been considered as priority do not have to be paid immediately like they do in the Chapter 7. You are able to pay this tax debt down over the period of your repayment plan. This relieves the burden of having to sell any of your assets to immediately pay the tax bill. An experienced Indiana bankruptcy attorney will advise you as to what will happen with your tax debt in your Chapter 13 bankruptcy.