12 Jul Should I Declare Chapter 7 Bankruptcy For Tax Debt
Are you thinking of filing for bankruptcy for tax debt? If you are, you’re not alone.
Last year—as detailed in a report made by the United States Courts—the number of bankruptcy notices may have increased by about 20%. And the bankruptcy reports in the month of March were higher than they’ve been in eleven months. The national bankruptcy research center did, however, reveal that there has been a roughly 6% drop in bankruptcy filings between the 1st fiscal quarter of 2011 and the 1st fiscal quarter of 2010. Although if you consult with a CPA tax attorney it’s widely agreed that more tax payers are declaring bankruptcy over tax debts owed than in previous years.
So, the idea of starting anew is probably at least a little tempting to you, but you should realize thatnot every type of tax debt is discharged by filing for bankruptcy. Returns that have not been filed are, for instance, not dischargeable. If and when the IRS decide to present you with a return substitute tax form—and you accrue tax liabilities as a result of this form—your resulting liabilities will rarely be dischargeable either. You may be able to file for bankruptcy if you find a form that has been filed later on, but the IRS strictly regulates these forms, and it does what it can to prevent many of the liabilities tax payers often incur from being discarded or discharged.
People often file for bankruptcy because they hope that, by filing, they will be able to hold on to the assets they have accrued over the years, and protect them from the IRS.But, if the IRS decided to mark your property for a tax lien before you petitioned for bankruptcy, you may find that the lien will stand even after the bankruptcy hearing has been conducted. You may also find that these tax liens are usually not discarded or discharged until you are able to pay for your property—for its market value—yourself.
You’ll also find that many taxable liabilities are rarely dischargeable. Employee withholding taxes are usually not, for instance, dischargeable in bankruptcy court. And fraudulent tax returns, as well as willful tax avoidances, are not discarded either.
So, as you can see, there are many restrictions that affect a bankruptcy claim. There are so many, in fact, that most tax payers interested in filing for bankruptcy find that they are better offconsulting a tax lawyer to help in negotiating some other type of solution with the IRS. The IRS—working in tandem with many state tax authorities—have many payment plans available to choose from such as an offer in compromise, and these plans offer interested tax payers the ability to pay off their debts without declaring bankruptcy.
These plans, therefore, may offer you the same fresh start instead of filing for bankruptcy might offer you. You’ll find, however, that if you choose to file for bankruptcy, you won’t be able to negotiate any of these plans effectively with the men and women who work for the IRS. So, before you file for bankruptcy, you’ll want to weigh your choices carefully. And you may want to work with the IRS to pay off your debt. By doing this, you’ll be able to avoid incurring any of the unwanted costs and consequences that often result from bankruptcy litigation.