Bankruptcy may be a powerful option, but it isn’t the cure-all that many people think it is.
In some cases, your IRS tax debt may be discharged through bankruptcy. However, the circumstances and the laws concerning an IRS bankruptcy are complicated and if you’re not careful it may not give you all the protection you expect.
At worst, bankruptcy can temporarily stop the IRS from seizing your assets and give you some breathing room. You may be able to discharge certain tax debts, or gain several years to pay off your tax debt without being further harassed by the IRS.
But in dealing with the IRS, bankruptcy can be a double-edged sword.
IRS Bankruptcy May Not Give You the All the Protection You Seek
Remember that while bankruptcy is designed to protect your income and assets, bankruptcy may require that certain assets and income amounts be given to your creditors, including the IRS. In fact, by filing an IRS bankruptcy, the statute of limitations is extended so that after the bankruptcy is over they still have just as much time to collect any nondischargeable IRS debts from you as they did before the IRS bankruptcy was filed.
Filing bankruptcy may stop further action by the IRS, but the bankruptcy court may still approve the turnover of certain property in some limited cases.
Make sure you have a tax professional to help you. You can’t just expect your accountant to handle everything. When facing an IRS bankruptcy, you need an experienced tax attorney.
There May be Less Costly Alternatives to IRS Bankruptcy
I’ve been a tax attorney for 12 years, and I’ll help you find the best means of settling your IRS tax debt. There are many other options, depending on your situation.
- I can file an Offer in Compromise for you, which may enable you to settle your tax debt for less
- We might be able to work out an installment agreement, where you pay the IRS a monthly amount, based upon your financial situation, until your full IRS debt is paid
- In some circumstances it may be possible to show the IRS that the release of an IRS lien on property will facilitate collection. In this case, it would make it easier for you to use the assets to pay off the debt by borrowing against them or selling them. Often this is an expected result which client has concerning bankruptcy anyway, but we may be able to arrange it in your favor without all the headache of bankruptcy
IRS Bankruptcy isn’t a magic wand to solve all your problems. In some ways, it can create new ones, by damaging your credit and harming goodwill with your business partners.
Remember that a bankruptcy simply means you’ve gained some legal protection from your creditors, and you may still have to pay some of them back some amount of money, depending on your ability to pay.
In an IRS bankruptcy different creditors are treated differently and some get paid something and others will probably get paid nothing. As your creditors line up to collect what they are allowed to get from you in a bankruptcy, the IRS may get paid first, but then again they may get paid nothing, depending upon the particular facts and circumstances of your case.
If there’s any way to settle your tax liability without filing bankruptcy, it might be in your best interests to do it. Call me at 1-800-509-2770 and we’ll find the best solution for you.
For best results, file an IRS bankruptcy only after you’ve explored all your other options and are able to make an informed decision, and then make sure you do it right.
What you need to know about IRS bankruptcy
When you owe back taxes to the IRS and they’ve decided you’re not being cooperative, they’ll begin to seize your assets or income until the tax debt is paid off. The IRS has tremendous power to do this. Without need for a court hearing, they can begin to:
- Levy your bank accounts, property, and other assets
- Garnish your wages or accounts payable
- Seize your life insurance cash value, retirement accounts, pensions and other benefits
- Generally cause you a lot of stress, frustration, and embarrassment
To fight back, you need to resist the IRS without breaking the law. Ultimately, you’ll need to deal with your tax debts in some manner. Bankruptcy is one of the options you may consider.
Certain tax debts are dischargeable in a bankruptcy–meaning you don’t have to pay them in full. Others are not. Your ability to get rid of IRS bankruptcy debts may depend on the kind of bankruptcy you file for (i.e., Chapter 7, Chapter 11, or Chapter 13)
If you owned or managed a business and you owe employment withholding taxes, this tax debt is not dischargeable through any type of bankruptcy.
If you file Chapter 13 bankruptcy, your income taxes may be dischargeable, and you may be able to protect your assets from risk the seizure.
Chapter 7 bankruptcy can potentially rid you of income tax claims. But whether you file Chapter 7 or Chapter 13, there are certain rules which have to be met before tax debt will be considered as dischargeable.
Also, keep in mind that a bankruptcy will automatically extend the statute of limitations on non-discharged taxes.
If you’re considering bankruptcy as a solution to your IRS problems, you need a tax attorney. With 12 years of experience, I can help you decide if bankruptcy is the best option for you, and help you avoid any common, costly mistakes. More importantly, I’ll explore other alternatives to filing an IRS bankruptcy to see if there’s a better solution.
Secrets to reducing IRS bankruptcy consequences
Timing and strategy are the keys to reducing your IRS debt through bankruptcy.
- Make sure your assets are disposed of in the best way. You may be able to legally protect some assets.
- Make sure you file the most beneficial type of bankruptcy. (Chapter 7 or Chapter 13 )
When you file an IRS bankruptcy, you absolutely MUST take these 3 precautions
- Make sure that bankruptcy is the best option. If you have few assets and the IRS is your only significant creditor, you may benefit more by filing an offer-in-compromise
- File the right kind of bankruptcy. This depends on the assets you hold and whether the any portion of the tax debt will be considered a “priority” claim and more of it would have to be paid back
- Don’t file bankruptcy until you’ve consulted with an experienced tax professional.
I’ve been a tax attorney for over 12 years, and I’ll help you determine the best way to proceed. Call me at 1-800-509-2770 or click on the link below for a free consultation. There may be an easier, less expensive way to settle your tax problems.
Take Action Now to Resolve Your IRS Bankruptcy Problems
If you feel hesitant about getting IRS bankruptcy help, it’s understandable.
But I may be able to help you make the right decision.
If you’re considering bankruptcy, your IRS situation may have gotten out of control. You may face some dire consequences if you don’t do something right away.
I may be able to save you a lot of time and stress. I may be able to resolve some of your immediate difficulties, and give you some breathing space. If you’re facing jail time, I’ll work toward preventing your incarceration.
Regardless of your IRS bankruptcy situation, I can work toward getting you the best possible outcome that’s legally obtainable. If you want to minimize your costs, protect your property and freedom, stand up to the IRS and move on,call me at 1-800-509-2770.