WILL BANKRUPTCY DISCHARGE MY IRS TAX?
Care is a must when considering bankruptcy to discharge taxes. May times there is a bankruptcy alternative.
The combination of a good bankruptcy attorney and tax attorney in the same person, is rare!!!
For example, a Chapter 7 bankruptcy, also known as liquidation bankruptcy, has a 3 year rule, a two year rule and a 240 day rule. At the present time, back taxes, some non trust fund tax assessments and transferee liability can be discharged in a chapter 7 bankruptcy.
A Chapter 13 payment plan for wage earners and small business owners to pay certain security priority debts, over time, will work only if the unsecures debts and secured debts are not excessive. A taxpayer can enter into a three to five year repayment plan that will include back taxes under Chapter 13.
A Chapter 11 reorganizes the debt and is financially feasible for wealthy individuals and more commonly “going” businesses. There are no debt limits but it is far more complicated, expensive and time-consuming. The advantage of a Chapter 11 plan is that it allows a longer period of time for payment of liabilities, including taxes.
One of the strongest provisions of bankruptcy action is that the IRS is prohibited to act to collect a claim from the taxpayer. Neither can the IRS file a lien notice, levy or siezure action, or commence/continue a tax court action. Creditors, including the IRS, can be held liable for damage, attorney’s fees and costs for violations of these bankruptcy protections.
However, there is a bankruptcy alternative. Please contact us to discuss your individual situation with our experts.
DISCLAIMER: none of the above is intended to be legal advice. A taxpayer and his or her representative should engage the services of a competent bankruptcy attorney when contemplating discharge of taxes and bankruptcy action.