Debts That Cannot Be Discharged Upon Filing For Bankruptcy
If you are facing overwhelming tax debt, you might be wondering what options you have for paying it off and moving forward with your life. Filing for bankruptcy can be a good option for some people, especially if their tax debt is more than a few years old. However, bankruptcy and tax debt can be very complicated and confusing, so you’ll want to work with an experienced Reno bankruptcy law office for the best possible outcome of your case.
Some people believe that tax debt cannot be discharged in bankruptcy, but that is not always true. For some situations, filing for bankruptcy can be the best way to take care of large amounts of tax debt. Sometimes, filing for bankruptcy can completely eliminate your tax debt; other times, it can help make the payments more manageable or stop penalties from accruing.
A detailed analysis from an experienced Reno bankruptcy attorney is the best way to determine whether filing for bankruptcy might be an effective solution for your tax debt and if so, when is the best time for you to file. There are many details that will need to be taken into consideration as you decide whether filing for bankruptcy is a good option for your situation.
Can My Tax Debt Be Discharged In Bankruptcy?
Some types of taxes may be dischargeable, while others are not. Income tax debt may be eliminated by filing for bankruptcy, although several conditions must be met. These include:
The tax return filing date must be at least three years prior to your bankruptcy petition filing date, and
The tax return must have actually been filed more than two years prior to your bankruptcy petition filing date, and
The tax liability must have been assessed more than 240 days prior to the bankruptcy petition filing date, and
You must not have committed fraud to attempt to evade your tax liabilities
If you can meet all of these requirements, your federal income tax debt may be able to be eliminated in bankruptcy. Be sure to consult with an experienced Reno bankruptcy lawyer before filing in order to verify that you have met all of these requirements and to make sure that filing for bankruptcy is the best choice for you. If you cannot meet the timelines, your federal income tax debt will not be discharged.
Tax penalties are typically discharged along with tax debt that is eligible for discharge in bankruptcy. Additionally, there are some circumstances where tax penalties can be discharged even if the tax debt itself cannot be discharged. Consult with your bankruptcy attorney for guidance.
What Tax Debts Cannot Be Discharged in Bankruptcy?
Some types of tax debts are not dischargeable even if they meet timeline requirements. For example, business-related taxes, such as payroll or sales tax debts, are more complicated than personal taxes. Because these are taxes that a company must collect on behalf of their customers or employees, they may not be dischargeable in bankruptcy.
If the IRS has issued a tax lien for your debt, bankruptcy will not eliminate it. This is true even if your debt meets the timeline requirements to be discharged in bankruptcy.
What Options Do I Have for Managing Non-Dischargeable Debt?
Even if your tax debts cannot be discharged in bankruptcy, bankruptcy can still be an effective solution for many situations. For example, you may be able to find relief from non-dischargeable tax debt through a Reno Chapter 13 bankruptcy. This is a type of bankruptcy that restructures your debt and establishes an affordable monthly repayment plan for 3-5 years based on your income and other qualifications. Although a Chapter 13 bankruptcy will ultimately not reduce the amount of tax debt that you are required to pay, it will stop further tax penalties from accruing while also stopping tax and debt collection efforts. This can provide a tremendous amount of relief while you work to repay your tax obligations. An affordable repayment schedule based on your income and expenses will be developed so that you can effectively pay off your debt without feeling overwhelmed.
Discuss Your Tax Debt Obligations with a Trusted Bankruptcy Attorney
Tax debt and bankruptcy can be complicated. Whether your debt can be discharged will depend on a variety of details. If you are wondering whether filing for bankruptcy might be an effective way to discharge or manage your tax debts, contact Zero Down Bankruptcy Lawyers of Reno. Our experienced attorneys have a comprehensive understanding of bankruptcy law and are ready to help you explore your options so that you can make the best choice for your situation. Don’t hesitate to get in touch with our team of compassionate, professional attorneys! Contact us today to schedule your free consultation.