A fateful decision...You have decided to file for bankruptcy and, while reviewing your creditors, you ponder whether the IRS can be included. There are a number of IRS rules and restrictions regarding bankruptcy and IRS debt. Additionally, you are not entirely free from IRS collection actions during bankruptcy.
Let's examine the evolution of an IRS debt and a bankruptcy:
Can IRS debt be discharged in bankruptcy? Yes, but your debt must satisfy three criteria. If it fails to meet even one of these conditions, you must devise an alternative method of debt repayment. The three criteria are:
You cannot include tax obligations that are less than three years old. Therefore, your tax debt from the prior year cannot be included.
You may not have any outstanding tax returns.
You cannot possess any audited tax returns because you committed tax deception.
One down...Suppose your IRS debt satisfies the criteria and you can include it in your bankruptcy; what's next? In accordance with the Automatic Stay of Collections, the IRS cannot take collection action against you while you are in bankruptcy.
The IRS has a loophole if you file for bankruptcy repeatedly. If your bankruptcy was dismissed within the past year, the IRS is only required to comply with the Automatic Stay for 30 days. If you have filed for bankruptcy twice, the IRS may disregard the Automatic Stay.
Do they ever give up? While the IRS cannot collect from you, they can do the following: The IRS can conduct an audit to ascertain the amount of your tax debt. The IRS can send you an annual statement of your tax debt. The IRS can apply your tax refund to your debt, or if you have a trustee managing your bankruptcy, the refund will go to them to be distributed among your creditors.
An end in sight...What happens to your tax debt with the IRS after bankruptcy? If your tax debt was included and discharged, it cannot be collected. However, remember these three criteria for including a debt in bankruptcy. Any tax debt that resulted from any of the aforementioned causes is still collectible. Moreover, interest and penalties have accrued on that portion of the debt during your bankruptcy.
The IRS and bankruptcy do not go hand in hand, but if you understand your rights, you can make the necessary decision regarding your debts and get your life back on track.
Now you have conclusive evidence...Use it!""
" - https://www.affordablecebu.com/