Past-Due Income Tax Debts? How Filing for Bankruptcy Can Help
Tax season has arrived. If you owe back taxes, this time of year may bring renewed worry about how you’ll manage to satisfy the tax debts you owe along with paying your other debts. Most people assume that bankruptcy can’t help reduce the amount of a debtor’s past-due income taxes, but this isn’t entirely true. Filing for bankruptcy might be your best option to prevent an IRS lien from being placed on your property, and it can even result in the elimination of certain tax debts. Read on to learn more about how bankruptcy can help with tax debts, and contact a knowledgeable Maryland bankruptcy attorney for more information
How Chapter 7 can help with past-due taxes
Recent past-due income taxes are considered “priority” debts; i.e., debts that survive a bankruptcy filing and can’t be discharged. What many people don’t know is that certain older tax debts can be discharged. A tax debt based on a return that was due over three years ago, which you actually filed more than two years ago, and which has not yet resulted in the IRS filing a lien on your property, may be eligible for discharge with a Chapter 7 filing.
Filing under Chapter 7 can also help prevent a tax debt from becoming secured. When filing for Chapter 7, the automatic stay imposed when you file your case will prevent the IRS or state tax board from filing a lien based on a past-due tax debt against your property. If you believe that a lien is about to be filed on your property in the near future, then time is of the essence in filing your bankruptcy case. This is especially important if you think that the tax debt might qualify for discharge, since it may no longer be dischargeable if it becomes secured.
Chapter 13 may be a better choice once a lien has been filed
Once a tax lien has been filed against your property, you may benefit more from filing for bankruptcy under Chapter 13. An automatic stay lasts only as long as your case is open, which in a Chapter 7 filing is only a matter of a few months. Under Chapter 13, you’d be provided with more time to get caught up on the payments you owe on a tax debt before the stay is lifted and you’re again subjected to debt collection efforts, such as a threat of foreclosure on a lien. You may also benefit from other advantages in filing for bankruptcy under Chapter 13 which a seasoned bankruptcy attorney can explain to you.
For assistance in deciding whether you’re a good candidate to file for bankruptcy under Chapter 7 or Chapter 13, contact a dedicated, knowledgeable, and experienced Maryland bankruptcy attorney at Haeger Law for a free consultation at 888-463-3520.