As we all know, tax debts can spiral out of control and lead to an IRS tax lien, wage garnishment, or even property seizure. Most people mistakenly believe that taxes are never dischargeable in a bankruptcy. This myth is absolutely wrong! Although there are certain criteria that must be met, bankruptcy relief is often the best way to solve a serious tax problem and stop IRS collection activity. The filing of a bankruptcy case automatically and immediately stays (stops) IRS bank account levies and wage garnishments, and enables the taxpayer to either obtain a discharge or reorganize his or her tax liabilities.
Remember, the IRS is not just any creditor and has the ultimate power to do things other creditors can only dream of. However, if you hire a lawyer before the situation gets worse, there are options and possible solutions available.
Some tax debts are dischargeable through Chapter 7 bankruptcy. If taxes are more than three years old and you filed tax returns related to them more than two years ago, the likely outcome is that you will not have to pay them. Tax obligations that are not dischargeable under Chapter 7 include taxes less than three years old, business taxes, sales taxes, and payroll taxes.
If you are not qualified to file for a Chapter 7 or have decided that Chapter 13 is your best option, non-dischargeable tax debts can be included in your repayment plan. In addition, bankruptcy’s automatic stay applies to the IRS as well, meaning all collection efforts pending against you will be stopped. Filing for Chapter 13 will also accomplish two other very important things: Penalties that the IRS has tacked on your tax debt will be discharged, AND, no new penalties or interest will accumulate while you are in Chapter 13. In short, you may pay considerably less money to the IRS by going through bankruptcy than you would if had tried to work out a debt settlement agreement with them on your own.
At Lozano Law Offices, we have expertise to help you meet the necessary criteria. Attorney Crispin Lozano will handle your bankruptcy case with professional know-how to get the job done. For answers to your questions about bankruptcy tax relief, please call us at (510-538-7188) or contact us online to schedule a free initial consultation.