You may not have purposefully or intentionally evaded filing your income tax returns. But given the fragility of your financial state, you may have known that paying off these taxes would be close to impossible. No matter, the Internal Revenue Service (IRS) may initiate measures to recover your outstanding tax debts, whether it be garnishing your wages, placing a lien on your family home, or otherwise. If these actions are heading your way, please continue reading to learn whether a bankruptcy filing can potentially discharge your outstanding tax debt and how an experienced Louisville, Kentucky consumer bankruptcy lawyer from Schwartz Bankruptcy Law Center can protect you from IRS intervention.
Can a bankruptcy filing discharge my tax debt?
If you are over your head with consumer debt, including tax debt, it may be well worth considering filing for Chapter 7 or Chapter 13 bankruptcy. This is because, at the close of a successful consumer bankruptcy case, the Kentucky bankruptcy court may order a discharge of eligible debts. Notably, dischargeable debts no longer fall within a debtor’s immediate financial responsibility from that point forward. Meaning, their creditors are no longer capable of pursuing collection efforts for these debts.
With that being said, your federal income tax debt may be dischargeable. But this is so long as the tax debt is at least three years old and the return was filed at least two years ago. What’s more, this debt cannot have been brought on due to your willful attempt to evade taxes or any other form of tax debt. Contrastingly, the following tax debts are likely nondischargeable:
- Your tax liens.
- Your most recent property taxes.
- Your post-petition tax liabilities.
- Your taxes owed due to fraudulent returns.
- Your payroll taxes, Social Security taxes, and trust fund taxes.
Can a bankruptcy filing stop IRS collection efforts?
Further, your bankruptcy filing prompts the Kentucky bankruptcy court to order an automatic stay. This order temporarily halts your creditors, including the IRS, from pursuing collection efforts against you. But once your bankruptcy case is dismissed or closed, it lifts the automatic stay. This is to say that the IRS may resume these activities for any of your outstanding nondischargeable tax debts mentioned above.
Hopefully, your bankruptcy filing frees up funds to contribute toward these tax debts. Here, you may voluntarily make payments during your Chapter 7 bankruptcy proceedings or include these payments in your Chapter 13 repayment plan. Post-bankruptcy, you may request to set up a new, manageable payment arrangement with the IRS, possibly paying off this debt in installments. This is nothing that your legal representative cannot help you work out.
In conclusion, if you still have lingering questions at this point in time, please do not hesitate to reach out to a skilled Louisville, Kentucky consumer bankruptcy lawyer. The team at Schwartz Bankruptcy Law Center will certainly be the perfect fit for you.
