Bankruptcy Possibilities
Your tax debt may be eliminated by a procedure called bankruptcy. You should consider the effects it will have on you and your family, though, and know that it won’t get rid of all your IRS issues. This option should be considered a last option, but we can explore the possibilities.
Chapter 7 (straight bankruptcy) and Chapter 11, 12, and 13 (repayment plans) are the 2 basic types of bankruptcy. Chapter 7 bankruptcy helps you to liquidate your debts. You can repay some but not all debts with a payment plan through Chapter eleven, 12, or thirteen bankruptcy.
To file for bankruptcy, you have to meet these 5 criteria:
- Filing deadline for tax return is a minimum of 3 years before filing for bankruptcy
- Tax return was filed a minimum of 2 years prior to filing for bankruptcy
- 240 days have lapsed since tax assessment prior to filing for bankruptcy
- Tax return was legitimate and not fraudulent
- Taxpayer was not guilty of tax evasion
Discharge isn’t relevant to all tax debts. Obviously, tax returns that weren’t filed can’t be discharged. One aspect of bankruptcy is that you should have filed your last 4 years tax returns before your case can go before the creditors’ meeting. You will be required to provide a copy of the most recent tax return to the bankruptcy court and the creditors have every right to ask for a copy of it too.
You have to be prepared for the long term effects of bankruptcy on you and your family. Your credit report could be affected by bankruptcy for up to 10 years. This will make career moves, renting, establishing new lines of credit, and obtaining loans very hard for you.
Filing for bankruptcy is a complicated process and changes are being considered, but all the same, confer with an experienced counsel beforehand.
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