Bankruptcy Taxes
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There is a general belief in the United States, among both taxpayers and most tax professionals, that Federal income tax debts cannot be discharged by filing for bankruptcy. However, this is a myth and is not correct. There are some circumstances under which people can receive bankruptcy taxes relief in addition to the other debt relief they receive when filing for bankruptcy.
Gaining tax through bankruptcy proceedings is a complicated matter, and undoubtedly this is one reason that there is a great deal of confusion regarding this issue. If you are in a situation where you have Federal back tax issues that are due, then it is even more important to get professional help with bankruptcy, as the tax issue complicates the process even more than in a normal bankruptcy case. There must be great care taken in the process of filing for brokeness, to be certain that all the details are properly handled, especially when any type of taxes are to be included among the debts.
Even for professionals, it can be mind boggling to find the middle ground that allows a taxpayer to be able to file for bankruptcy taxes relief. Some of the things that must be balanced and taken into account are the IRS codes and the IRS powers and limitations to levy and lien, the US bankruptcy statues, and the rights of the US citizen. However, even with all of those considerations, there are instances that allow people to resolve their serious tax issues through filing for bankruptcy.
Filing for taxes relief though either a Chapter 13 or a Chapter 7 one will cause an automatic stay to be issued. This will effectively stop all collection activities. This includes stopping bank account levying and garnishing of wages by the IRS and other creditors as well.
Once the stay is issued, the taxpayer and their attorney have some breathing room and time to decide how to best proceed. They can either attempt to get a discharge of the tax debt under a Chapter 7 filing, or they can reorganize the tax obligation by filing Chapter 13 bankruptcy. Which Chapter is filed will depend on a number of factors, including the total amount of all the debts that are owed, the assets of the debtor and the expected future income and ability to pay under a Chapter 13 reorganization.
In 2005, the US Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This act made a number of reforms to the Federal Code governing filing for brokeness. One of these changes was a merging of the discharge rules that applied under a Chapter 7, a Chapter 11, and a Chapter 13 bankruptcy.
There is no question that in this situation, it is absolutely essential to secure adequate bankruptcy help in order to attempt to gain bankruptcy taxes relief. There seems to be no single approach or solution to resolving tax issues via bankruptcy, as each case is taken under consideration individually. In general, it can be stated that most of the time old tax debts are more likely to be considered for discharge than new tax debts, which tend to be treated more like property taxes which are not able to be discharged under any circumstances.
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