Can Chapter 7 Bankruptcy Eliminate Tax Debts?
Owing money to the IRS is probably not a good situation to be in. The IRS can put liens on your property if you owe them money, and they may even be able to garnish your wages. If you owe money to the IRS and are considering filing bankruptcy, you might want to talk to a lawyer to find out if the bankruptcy would wipe out the tax debt you have. While Chapter 7 bankruptcy usually does not help with tax debt, there are times it can, and here are a few things to know about this.
Chapter 7 Discharges Qualifying Debts
The first thing to understand about Chapter 7 bankruptcy is that it will only allow you to discharge debts that qualify. This typically includes credit card debts, medical bills, and debts owed for car repossessions. It does not automatically include money owed for certain debts, though, such as student loans, child support, and tax debts.
Your lawyer will most likely be able to look at your list of debts and tell you which ones will qualify. If you have tax debt, the lawyer will need to look into the debt to find out if it will qualify or not.
It Can Discharge Tax Debt In Certain Situations
As your lawyer looks at your tax debt, he or she will be looking for several characteristics about it. This is because if it meets certain characteristics, it can be included in a Chapter 7 case and end up being forgiven. There are several conditions that must be met, though, and the main one is the age of the tax debt. If the tax debt is owed from a tax return that you filed at least two years ago, it will most likely qualify for discharge. If it is more current than this, it will not qualify for discharge in a Chapter 7 case.
The tax debt must also be related to your income. In other words, if the tax debt is not a result of your income taxes, it probably will not qualify. For example, if the tax debt is from unpaid property taxes, you will not be able to include it as a qualifying debt.
The best way to find out if Chapter 7 bankruptcy would help you eliminate your tax debt is by visiting a bankruptcy lawyer. A visit to a bankruptcy lawyer will also help you understand if you qualify for Chapter 7 and how it would benefit your situation.
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