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Bankruptcy covers debts owed to government

by | Dec 19, 2012 | Chapter 13, Firm News

All over the country and right here in Memphis, people continue to file for bankruptcy. Chapter 13 bankruptcy allows the debtor an opportunity to restructure and pay down his or her debts to creditors.

Recently in the South, a couple filed for bankruptcy. The husband is currently working as a police officer. The couple owes close to a half a million dollars to at least 40 different creditors. Among their creditors is the Internal Revenue Service.

The wife is the subject of an FBI probe. Reports and a state investigation reveal that she has stolen money in a bank fraud scheme. State prosecutors charged her, but that investigation has ended, and the state agency has transferred the case to the federal government. At this point, the investigation will likely not have an effect on the bankruptcy proceeding.

Filing for bankruptcy allows debtors the opportunity to work with their creditors to repay their debts. A trustee is appointed to manage the bankruptcy proceeding. Rather than the debtor paying each creditor individually, the debtor works out a payment plan with the trustee and pays his or her debts directly to the trustee.

Bankruptcy provides a good way out of debt for most people. Certain debts, including debts owed to the federal government, are discharged in bankruptcy. It is important to remember that student loan debt is not discharged in bankruptcy.

An attorney can also assist consumers with bankruptcy and assessing all of their options. They can help to guide the debtor through the process before and after bankruptcy.

Source:, “Bankruptcy filing: Ormond Lt., wife in FBI probe, owe half-million dollars in debt,” Lyda Longa, Dec. 12, 2012