A Morris County Bankruptcy Lawyer Explains
Chapter 7 and Chapter 13 bankruptcies offer valuable solutions to individuals who are struggling under the weight of debt. Whether their financial troubles were caused by unexpected medical bills or sudden job losses, bankruptcy has helped countless people settle their debts and restart their financial lives.
In addition to typical debts like credit cards, car loans and mortgages, some people find themselves worrying about how to satisfy outstanding income tax debts. The IRS is one of the most fearsome creditors, and one of the most relentless when it comes to pursuing and collecting from delinquent debtors. However, individuals and families have options for resolving some of their tax debts through bankruptcy.
Handling Back Taxes in Bankruptcy
Certain kinds of taxes are dischargeable in bankruptcy – namely, federal and state income taxes. Business-related taxes like payroll and sales tax are not dischargeable, nor are penalty taxes or most property taxes. The other criteria for discharging income taxes include:
- You did not commit fraud when you filed your taxes, and you did not willfully attempt to evade taxes.
- The tax debt is at least three years old when you file bankruptcy, and the tax was assessed at least 240 days prior to filing bankruptcy.
- You filed good faith returns for the taxes that you owe at least two years prior to filing bankruptcy.
In the case of a Chapter 7, income tax debts that meet such criteria would likely be discharged at the completion of your case. Conversely, a Chapter 13 filing structures back taxes into a payment plan that allows you to satisfy your tax obligations over three to five years. The advantage to this plan is that penalties and late charges are typically forgiven upon the conclusion of your case.
Every situation is unique, however, and the best way for handling tax debts varies greatly from individual to individual. Before you file for bankruptcy, it is essential to seek legal assistance that can help you navigate what can be a very complicated process and to ensure you have the best chances at discharging the debt.
Take Action Today by Contacting a Qualified Bankruptcy Attorney
Contact our office today to take the first steps towards beginning your financial life anew and relieve yourself of old income tax debt. Our Morris County bankruptcy attorneys have the experience and qualifications to make sure that your bankruptcy is properly handled in a manner that provides the maximum benefits to you.