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Elimination of Taxes by Filing Bankruptcy Under Various Chapters

Elimination of Taxes by Filing Bankruptcy Under Various Chapters
"""If your Chapter 7 or Chapter 13 petition is approved, you may be released from certain personal income tax obligations. However, if you satisfy certain requirements, filing for bankruptcy may release you from all types of tax obligations.

Filing Under Chapter 7 And Taxes

If you filed a chapter 7 petition and received a subsequent discharge, certain taxes will be automatically eliminated if the following conditions are met.

You must have timely filed the required tax return.

You must not have been assessed any fraudulent fees while filing your case.

You filed your tax return at least three years prior to your bankruptcy filing. Even if the court declares you bankrupt, you will not be absolved of any IRS debts incurred within the past three years.

In certain instances, the late submission of a tax return may be disregarded if it was not an attempt at fraud and was filed at least two years prior to the filing of your petition. Your tax debt may be dischargeable. For instance, if the return was filed in 1992 instead of 1988 and the petition for chapter 7 bankruptcy was filed in 1996, the taxes may be discharged. Nonetheless, ensure that the IRS has thoroughly assessed these taxes at least 240 days prior to filing your petition.

The Non-Deductible Taxes

Sometimes, even if you meet all of the above criteria, you may not qualify for chapter 7 tax relief. For instance, if the IRS has placed a tax lien on some of your assets, you are responsible for paying these tax obligations in full. In contrast, if you have been declared insolvent under chapter 13, the court may order the IRS to waive the penalties or accept the proposed payment schedule.

Filing Under Chapter 13 And Taxes

In Chapter 13 bankruptcy, you must adhere to a repayment plan. You only need to focus on your finances and make subsequent payments to the trustee, who will reimburse your creditors. Clearly, creditors are not compensated in full immediately. According to the court's recommendation, they receive their money back in installments. Likewise, the court may also request that the IRS accept extended tax payments. However, you must repay the entire tax bill over a period of three to five years. In most cases, tax penalties are dischargeable under chapter 13 because they are deemed unsecured debts.

In general, filing for bankruptcy, whether under chapter 7 or chapter 13, can be a very effective means of eliminating tax obligations.

" - https://www.affordablecebu.com/

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"Elimination of Taxes by Filing Bankruptcy Under Various Chapters" was written by Mary under the Finance / Wealth category. It has been read 155 times and generated 0 comments. The article was created on and updated on 02 June 2023.
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