Many people think that bankruptcy is a simple process that will erase their debt and give them a fresh start. While this is partially true, there are some debts that are much easier to discharge than others. Some debts cannot be discharged at all, so it is important to become familiar with the different laws and requirements that are associated with bankruptcy and debt discharge.
Some of the debts that are commonly asked about include things like student loan debt, child support payments, debt from medical bills, and debt that is owed to the federal government in the form of taxes. While most of these debts are nondischargeable by bankruptcy, debts associated with taxes can be a tricky issue. The 2 kinds of tax debts that are most commonly asked about involve liens because of unpaid taxes and unpaid income taxes. Depending on the type of bankruptcy you are filing you will have different options when it comes to tax debt. Below, it is explained in more detail, but it is always best to consult with an El Paso bankruptcy lawyer as the language or paperwork may be too complicated to understand.
Regarding taxes with the federal government, you have basically two types of taxes which are personal income taxes – form 1040 and employee taxes – forms 941 & 940. Employee taxes are not dischargeable in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, employee taxes must be paid in full for the plan to be feasible and are generally classified as a priority creditor. Personal income taxes however are dischargeable in a bankruptcy case if the taxes owed are over three years old from the due date to file the returns and the tax return(s) have been filed & assessed with the IRS more than at least two years ago. If a tax lien has not been filed to secure the taxes that fall into this category, then the taxes may be discharged in a Chapter 7 and/or become classified as an unsecured debt in a Chapter 13 and may be crammed down. If a tax lien is filed for personal income taxes against a Debtor, then the question that must be asked: Is there any property of value to secure the tax lien? If the answer is yes, then this value must be negotiated and paid to release the tax lien after receiving a Chapter 7 discharge and/or in a Chapter 13, this secured portion of tax lien is paid in full through a Chapter 13 plan as a secured creditor.
It is a good idea to sit down with a bankruptcy lawyer before you start the bankruptcy process. In this meeting you will have a chance to ask all of the questions that you may have about the process as well as reviewing the required documents so that the lawyer can make an assessment of which debts can be discharged. Start this process with a bankruptcy lawyer by doing some research on the different lawyers in your area. Find one that has significant experience dealing with bankruptcy and specifically tax discharge through the process. Choosing a reliable lawyer to help you through this process will protect you from making mistakes that can disqualify you from getting a debt discharge through a bankruptcy.
About the Author: Jeff Davis is the Owner of the Davis law firm, and a highly experienced El Paso bankruptcy attorney. To find out more information about a El Paso bankruptcy lawyer, please visit www.jeffdavislawfirm.com.