- Author: George Haines
- Published
Get Rid of Tax Debt in a Nevada Bankruptcy
Bankruptcy may be the best option to eliminate or manage a debt that is more than a few years old. However, the treatment of tax debt in bankruptcy is exceedingly intricate, which is why so many individuals are perplexed. Many people feel that Uncle Sam will never leave them, even if they are bankrupt. That isn’t always the case, though. In fact, filing for bankruptcy may be the best way to cope with tax problems. In some circumstances, bankruptcy can completely eliminate tax debt; in others, it can just help make it more manageable; and in still others, it can do both. Determining which is the case for you is dependent on the facts and circumstances of your specific situation, and thus necessitates a thorough examination.
Tax Debt that can Be Discharged in Bankruptcy
If a debtor meets certain criteria, he or she may be able to have certain tax debts discharged in bankruptcy. The debtor must owe either state or federal income taxes to be eligible for this type of relief. The debtor must not have filed a false return or “willfully endeavored” to escape taxes, among other things.
Before filing for bankruptcy, the taxpayer must have filed a tax return within the previous two years. The IRS must have assessed the tax liability for 240 days or more before the debtor enters bankruptcy, according to the “240-day rule.” If the IRS has an offer in compromise with the taxpayer or the taxpayer has previously filed for bankruptcy, the IRS can extend the time limit. The taxpayer must also demonstrate that he or she lacks the financial resources to pay taxes, and that his or her financial situation is unlikely to change anytime soon.
Types of Taxes Can Be Discharged in Chapter 7 Bankruptcy
The purpose of the Chapter 7 bankruptcy is to free the debtor from the burden of unpayable obligations and provide him a fresh financial start. The Chapter 7 discharge is a permanent injunction issued by the court prohibiting discharged creditors from pursuing collection action against the debtor. Despite the fact that the discharge order is quite broad, certain debts are excluded.
The following are some of the debts that are often discharged in a Chapter 7 bankruptcy:
- Credit cards
- Medical bills
- Unsecured personal loans
- Old utility bills
- Certain income tax debts that are more than three years old
- Payday loans
The following debts are usually not discharged in a Chapter 7 bankruptcy:
- Recent income tax debts
- Domestic support obligations (child support and alimony)
- Student loans
- Government fines or criminal restitution
- Any debt resulting from an intentional injury
- Any debt resulting from a DWI
- Any debt incurred by fraud
Debts that are not discharged by bankruptcy will remain unpaid after the bankruptcy is completed, and the creditor may pursue collection action against the debtor. As a result, it may be advantageous for some debtors to file Chapter 13 and use the automatic stay to pay a non-dischargeable debt while the bankruptcy case is pending, particularly in cases involving income tax debt or child support arrearages. If you can’t pay your bills, talk to an experienced attorney about your options under the federal bankruptcy laws. A Chapter 7 bankruptcy discharge might provide you peace of mind and help you get back on track financially.
Requesting for Tax Debt Discharge
The debtor must submit a Motion for Discharge with the court and show that he or she has met certain conditions. The debtor bears the burden of proving to the satisfaction of the court that his or her inability to pay was not due to willful disregard. Instead, circumstances outside his or her control should have caused this.
An attorney who is familiar with bankruptcy laws and has dealt with IRS tax issues can assess a debtor’s position and determine whether his or her tax liability is dischargeable in bankruptcy. The debtor’s attorney might also provide information on additional tax relief choices.
Freedom Law Firm is here to help.
Bankruptcy is often the last but necessary resort. It is a delicate and complex proceeding, and you want someone with plenty of experience to consult with, guide you through the process and help you determine the scope of the discharge.
In many cases, unless a party in interest files a complaint objecting to the discharge, the bankruptcy court may issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors.If you would like to find out whether bankruptcy is the right option for you, please request a call-back by submitting a short online form. All initial consultations are FREE and confidential.
