Hiring A Bankruptcy Attorney For Peace Of Mind
Bankruptcy And Tax Debt: What Qualifies?
Gabriel Freeman
Bankruptcy is often associated with excessive credit card debt and past due mortgages. The average person doesn't typically think about high tax debt as a debt they can discharge under bankruptcy. Tax debts can be eliminated when you file for a Chapter 7 discharge; however, there is a certain set of criteria that must be met. If you are dealing with an overwhelming amount of tax debt, learn whether or not a Chapter 7 discharge can help you.
Type Of Taxes
What type of taxes are you looking to discharge? If you aren't discharging income taxes, you likely won't fall under this inclusion. The government has strict rules barring any other types of taxes from being discharged.
Should you be in a situation where you have multiple types of tax debts, such as income, payroll and personal property taxes, this does not mean you cannot file. You can still go through the discharge process, but your other tax debts won't be included.
Time Of Filing
There are also requirements when it comes to when the taxes to be discharged were both due and filed. First, the filing year for the unpaid tax debt must be at least three years prior so any new tax debts would not be able to be included within the discharge.
Secondly, you must have filed the return at least two years prior to your bankruptcy filing. To put this into better perspective, in the year 2016, you would only be able to discharge tax debts that are from the year 2013 or prior that you filed no later than 2014.
No Instance Of Fraud
If the origin of the tax debts are income taxes but you have fees and penalties included within your total due for any fraudulent activity, such as unlawfully claiming a dependent, providing a false social security number, or any other illegal method for evading a tax payment, you cannot include any of your tax debt within the Chapter 7 discharge.
When you have a documented case of fraud, you basically absolve your legal right to this benefit because of your actions. Don't try to get around this requirement as your returns will be carefully combed for any discrepancies.
If tax debt is overwhelming your day-to-day life and your survival, and you meet the criteria, Chapter 7 can help. An attorney like one from O'Connor Mikita & Davidson LLC can best analyze your situation to help you plan the best course of action.
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