As 2010 comes to a close, it is time to tackle taxes and planning for your business. If you are an entrepreneur who believes that debt is overwhelming and bankruptcy is the next step, here is an article from Wystan North:
Does Bankruptcy Clear IRS Tax Debt?
by Wystan North
Many people who are in deep debt owe a substantial portion of that debt to the IRS. It’s understandable that if you are already struggling financially, paying all or part of your taxes can be a challenge or even impossible. If you are in a similar situation, you might be considering filing chapter 7 or 13 in order to clear your IRS debt.
However, though you can reorganize, reduce or eliminate most debts by means of a bankruptcy procedure, IRS debt is one of the types of debt that, for the most part, survives bankruptcy. It is important to realize though, that this is not an absolute rule.
Things to Consider:
There are a number of aspects that must always be taken into consideration when you have to file bankruptcy and you have an IRS debt.
- Once you file bankruptcy, the automatic stay goes into effect, which prohibits any creditor from further collection actions against you while your bankruptcy case is in process.
- Any creditor who wishes to collect a debt from you, including the IRS, must do so in the bankruptcy court where your case is being filed.
- If the IRS chooses to do so, the court will decide what happens with the debt.
- In a chapter 13, your IRS obligation will most likely be included in the repayment plan, which means you repay the debt over time.
If you file chapter 7, aspects such as whether your tax obligation dates back to three years before filing bankruptcy, and how many fines and tax debts built up on that, will be taken into consideration when determining whether your IRS debt may be discharged in bankruptcy.
Filing bankruptcy when you have a tax obligation is complicated. You are always advised to retain the services of a skilled bankruptcy lawyer, as well as a good accountant, to advise you about your options.
Finding a Bankruptcy Lawyer:
You will be required to provide documentation of all your tax filings and payments, as well as any additional documentation the court requests. However, there are extremely skilled bankruptcy lawyers who are experienced in dealing with cases in which debtors with no resources include their tax debt in their bankruptcy filing, or others, who have a tax debt on their business and wish to eliminate as much of this debt as possible.
Bankruptcy laws and regulations always determine which debt you may discharge by means of a bankruptcy procedure, but it is imperative that you understand exactly how these bankruptcy laws and regulations work in order to get the maximum amount of protection possible for yourself and your assets. Consult with an experienced bankruptcy lawyer and make sure your documentation is in order before filing bankruptcy to discharge your IRS debt.
About Author :
The author of this article has made his mark by writing on legal issues especially on Filing Bankruptcy procedures in different states. The author regularly writes on bankruptcy related issues like Ohio bankruptcy, Filing Bankruptcy In Ohio, chapter 13 bankruptcy and chapter 7 bankruptcy etc.
Bankruptcy Balance is a National Attorney Network to help people from all walks of life evaluate and find solutions to their debt.
You have already heard the stories about the successful entrepreneurs who went bankrupt five times before they hit a home run. Hopefully you will find success without the going bankrupt multiple times. The take away from Wystan is to get professional help and be aware that bankruptcy gets complicated with tax debt.