Florida Bankruptcy Attorney
Tax Debt Relief through Bankruptcy
Bankruptcy shouldn't be your first choice if you are behind with your taxes, but if you meet the qualifications, it may offer significant advantages over the installment plan the IRS will propose. At the law offices of attorney Michelle Armstrong, P.A., we can help you determine if your tax debt could be affected by filing for bankruptcy.
Chapter 7 Bankruptcy and Tax Debt Relief
Not all tax debts can be wiped out in bankruptcy. You can discharge debts for federal income taxes in a Chapter 7 bankruptcy only if you meet the following conditions:
- The taxes you owe are income taxes (not payroll or fraud penalties).
- You did not commit fraud or willful tax evasion.
- Your debt is at least three years old and you filed a tax return for the debt you wish to discharge at least two years before filing the bankruptcy.
- The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition (the "240 day rule"), or must not have been assessed yet. This time limit may be longer if the IRS had suspended collections because of an offer in compromise or a previous bankruptcy filing.
- You qualify for Chapter 7 bankruptcy under the new means test (based upon where your income falls in comparison to the state median income for your family size).
Effect of Federal Tax Liens: If your taxes qualify for discharge, a Chapter 7 bankruptcy will wipe out your obligation to pay the debt and prevent the IRS from garnishing your wages or seizing your bank account. But, any tax liens recorded before a bankruptcy will remain, and you will have to pay off the lien in order to sell your home. An experienced lawyer can help you understand your options.
Chapter 13 Bankruptcy and Tax Debt Relief
There are advantages to paying your tax debt through a Chapter 13 debt repayment plan rather than an IRS payment plan. In Chapter 13, you make monthly payments based on a realistic assessment of your financial situation and the money you have available after your living expenses are deducted. Other creditors cannot collect on debts while you're making payments through the plan, so your cash flow for payments into the plan is protected.
Tax Return Filing Requirements Related to Bankruptcy
Federal tax returns must be provided as proof of income in both Chapter 7 and Chapter 13 bankruptcy. In order for a Chapter 13 debt repayment plan to be approved by the court, all tax returns must be filed for the four years prior to the bankruptcy filing date.
Contact Us
If you seek tax debt relief, both chapter 7 and chapter 13 bankruptcy provide options to help you eliminate your debt. We can help you reach a workable settlement. At the Broward County law offices of Michelle Armstrong, P.A. we will explain all your options. Contact our Coral Springs, Florida office today for a free initial consultation.
We are a federally designated Debt Relief Agency under the United States bankruptcy laws. We help people find solutions to their debt problems, including, where appropriate, assisting them with filing for bankruptcy relief under the United States Bankruptcy Code.
