Filing for Bankruptcy
Declaring Bankruptcy Puts An Automatic Stay On Delinquent Taxes
When a person has a back tax issue, there are many different paths towards resolution. One option may be filing a Chapter 7 or Chapter 13 Bankruptcy. Bankruptcy can be an effective way to put your financial house in order and potentially reduce the total tax liability owed.
In a Bankruptcy, there is a distinction between priority and non-priority debt. With regards to Income Taxes owed, priority debt survives while non-priority debt gets discharged. Priority debt is generally your most recent three tax years owed, while anything older is generally considered non-priority. Any unpaid balances of the non-priority debt will be fully discharged upon completion of the Bankruptcy. Clients have been able to go through a Bankruptcy and come out with a totally clean slate with the IRS, effectively paying “pennies on the dollar” for their tax bill, while eliminating other unsecured non-tax debt.
There can be other advantages of a Bankruptcy as well. All interest and penalties cease to accrue during the Bankruptcy period, allowing you to keep the debt from spiraling out of control. A Bankruptcy places an automatic stay on collection activities. Any previously issued levies will be released and no new ones can be issued while the Bankruptcy stay is in place. A Chapter 13 Bankruptcy may allow for a more favorable payment plan than the taxing authority would. Through a Chapter 7 Bankruptcy, you may be able to discharge tax debt and/or consumer debt, putting you in a better financial situation to resolve any remaining tax liabilities if they are not all fully discharged.
Most national tax resolution firms attempt to steer all clients towards an Offer in Compromise or payment plan. They do not look at Bankruptcy as a potential solution because they do not offer that service. We analyze ALL your options to offer you a comprehensive plan that will make the most financial sense for you.
Give us a call at (877) 829-2455 to schedule your initial consultation to see if Bankruptcy is the right resolution for your situation.