Another Review, Class... Many taxpayers consider Bankruptcy for eliminating their IRS Tax Debt. But generally speaking, Bankruptcy is an ineffective tool for Tax Debt resolution. Taxes are rarely discharged no matter what Chapter you file. If your Tax Debt is not discharged, collections efforts will resume full force.
Why it’s better to seek a resolution other than Bankruptcy
The bankruptcy court is not designed to determine tax issues. In fact, the bankruptcy court does not have the authority to determine the amount or legality of a tax, fine, or penalty (According to IRS Publication 908, Bankruptcy Tax Guide). In most cases, Tax Debt will not be discharged and the Tax Debt will remain.
Three Common Bankruptcy Traps: Why Bankruptcy doesn't work for Tax Debt.
1. Having Money and Assets
If you have plenty of money in the bank to satisfy your debt, your money will be seized to satisfy your IRS Tax Debt.
2. Filed Before?
If you filed under Chapters 7, 11, 12, or 13 and paid your unsecured creditors less than 70% of what you owed them, you cannot earn another discharge.
3. Secured Creditors
If a creditor has a right to take specific property to satisfy a debt, that creditor is secured. That means Tax Liens survive Bankruptcy. You either pay after Bankruptcy, or the IRS can repossess your property.
There are many options for resolving Tax Debt. If you are not sure which route to take, consider contacting a qualified professional for advice or assistance.Labels: Bankruptcy
