Bankruptcy

Are you drowning in IRS tax debt with no lifeline in sight? Filing for bankruptcy might be the solution you’ve been searching for. In specific circumstances, filing for bankruptcy may be a good solution to resolve your tax debt. Yet in other cases, filing bankruptcy for the purpose of resolving tax problems might not be effective or even a viable option at all.

At the law office of Steven N. Klitzner, we have experience with a wide range of tax resolution strategies, including bankruptcy as a means of tax debt resolution. Our team will guide you through the importance of considering bankruptcy as an option for discharging IRS tax debt and its implications on your financial future.

Understanding Bankruptcy and IRS Tax Debt

Bankruptcy is a legal process that provides individuals and businesses with a fresh start by eliminating or restructuring their debts under the protection of the federal bankruptcy court. When it comes to IRS tax debt, bankruptcy can be a powerful tool for wiping out certain types of tax liabilities, offering relief to those who find themselves overwhelmed by financial obligations.

What are the conditions for discharging tax debt through bankruptcy?

To discharge tax debt through bankruptcy, certain conditions must be met, including:

1. Type of Tax Debt
   Generally, only income tax debt is eligible for discharge through bankruptcy. Other types of tax debt, such as payroll taxes or penalties resulting from fraudulent tax returns, are typically not dischargeable.
   
2. Age of Tax Debt
   The tax debt must be from a tax return that was due at least three years before filing for bankruptcy.
   
3. Filing Requirements
   The taxpayer must have filed a tax return for the debt in question at least two years before filing for bankruptcy.
   
4. Assessment Date
   The IRS must have assessed the tax debt at least 240 days before filing for bankruptcy.
   
5. No Fraud or Evasion
   The tax return must not be fraudulent, and the taxpayer must not have attempted to evade paying taxes.
   
   

What are the types of bankruptcy that can discharge tax debt?

The two primary types of bankruptcy that individuals may consider for discharging tax debt are:

1. Chapter 7 Bankruptcy
   Also known as “liquidation” bankruptcy, Chapter 7 allows individuals to discharge certain debts, including qualifying IRS tax debt, by liquidating non-exempt assets. This process typically lasts a few months and provides a relatively quick path to debt relief.
   
2. Chapter 13 Bankruptcy
   Commonly referred to as “reorganization” bankruptcy, Chapter 13 allows individuals to restructure their debts and create a manageable repayment plan, which may include IRS tax debt, over a three to five-year period. This option is suitable for individuals who have a regular income and want to retain their assets while resolving their tax obligations.

Is Bankruptcy Right for You?

At the law office of Steven N. Klitzner, while we do not handle bankruptcy cases, we can provide guidance and advice to help you determine whether bankruptcy is a viable option for resolving your IRS tax debt. Every individual’s financial situation is unique, and it’s essential to weigh the pros and cons carefully before making a decision.

If you’re struggling with IRS tax debt and considering bankruptcy, don’t navigate this complex process alone. Reach out to us to schedule a consultation, and let’s explore your options together. Relief from IRS tax debt is possible, and bankruptcy may be the key to securing your financial future.

Contact us for a free and confidential consultation today!