May people who consider bankruptcy are facing debt on all sides, in their personal lives, in their professional lives, and even in their relationship with the IRS. While all debts are dangerous to some degree or another, tax debt is very difficult to address for some people, and may completely “sink their battleship” in a hurry if they do not address it directly as soon as possible.
Proper use of a bankruptcy is one of the most effective ways of discharging many debts, but many people assume that they cannot discharge tax debt with a bankruptcy. While it is true that consumers cannot discharge many kinds of tax debt through bankruptcy, they may still discharge some kinds of tax debt, as long as they meet a number of other requirements. If you find yourself facing serious tax debts, you should carefully examine your own circumstances to determine if you qualify for discharging your debt through Chapter 7.
Qualifying for the discharge
First, it is important to understand what type of tax debt you carry, and whether it is dischargeable at all. In general, only income taxes qualify for discharge, and even then only after a debtor meets a number of other obligations. Payroll taxes, tax penalties, and other forms of tax debt that are not income tax do not usually qualify.
If your debt is due to unpaid income tax, then you may qualify for a discharge if:
- The debt itself is at least three years old
- You already filed the tax return for the appropriate year
- You did not commit fraud while filing the return
- The IRS has not assessed tax debt yet OR
- The IRS assessed the tax debt at least 240 days before you file for discharge
If your debt and your actions surrounding the debt match these requirements, then you may have grounds to discharge your income tax debt through Chapter 7 bankruptcy.
Finding hope in hard times
When a person considers bankruptcy, especially to deal with a tax debt, it almost always means that he or she cannot find another way out of a very difficult place, both financially and personally.
If you are considering radical options to reset your financial life, do not put off this important step. The sooner that you understand the inner workings of your bankruptcy options, the sooner you can take action to put an end to your debt and chart a course to lasting financial freedom in the future.
Do not put off taking this step. A sound financial plan helps protect your rights and privileges, as well as the well-being of those who love and depend on you.