Arming yourself with bankruptcy information can help reduce the stress of your situation. These articles written by the Lawyers at Khoshnood Law Firm can help explain in detail issues such as wage garnishment, taxes, foreclosure and other bankruptcy issues.
I am often asked can I discharge income tax owed to IRS in bankruptcy. The short answer is Yes in some situations. The real answer is quite complicated and it depends on several factors. Generally speaking, if the debt owed to the IRS is classified as general unsecured debt, then that debt can be discharged in bankruptcy. If you owe back taxes, I suggest contacting us for a free consultation. You cannot figure this out by reading online articles.
Income tax repayment in Chapter 13 Bankruptcy
Let’s say your taxes are not dischargeable in bankruptcy. Now what? You should consider Chapter 13 as an option. In a Chapter 13 plan you repay income taxes that are not dischargeable over up to five years! During this period, no additional fees are added to the taxes you owe. In other words, if you complete your Chapter 13 plan, the taxes that are scheduled to be paid in your plan will be paid dollar for dollar without accruing additional fees. These fees can be very substantial and getting a break on them for 5 years can add up to thousands of dollars worth of savings!
IRS’ payment plans vs. paying taxes through a Chapter 13 Bankruptcy
IRS’ payment plans may be low enough you can afford, but they may never eliminate the debt. When IRS’ set you up on a payment plan, it typically does not stop adding fees to it. The fees tend to be very high. So in many situations, the monthly payment is less than the fees that are being added to the taxes owed. In other words, you make monthly payments, but the principle balance remains the same or goes higher.
This is not the case in a Chapter 13 bankruptcy. Taxes that are not dischargeable get paid as you make your bankruptcy payments. IRS fees are not added for the entire time you are in bankruptcy. This way, you stand a real chance at paying taxes that cannot get discharged in full. This is a significant benefit of a Chapter 13 Bankruptcy that is often overlooked.