Bankruptcy And Tax Debt
If you are struggling with excessive debt and owe thousands of dollars in back taxes, you may feel overwhelmed. But there are remedies to your situation within reach. A qualified bankruptcy attorney can help to explain some options that may bring fairly immediate relief. After all, having creditors calling at all hours is bad enough; having the IRS breathing down your neck is positively intimidating!
The number of people who owe the IRS unpaid income taxes is on the rise, probably because the number of full time freelancers and part time moonlighters are on the rise. For individuals who don’t have an employer to take out required taxes with each paycheck, it can be a blunt surprise when the tax bill comes due. When they’re not paid on time, a notice comes from the IRS, and then another and another. Each successive notice becomes that much more menacing, until it eventually rises to the level of legal notices. Eventually, they may place a lien against your bank accounts or even start garnishing wages
An Automatic Stay
In order to get a break from the pressure, you could file a Chapter 7 Bankruptcy. As soon as you file, you become the recipient of a temporary automatic stay, which means creditors—including the IRS— must leave you alone while you figure out next steps. Your property and accounts enjoy protection from threat as well.
Rules on Erasing Tax Debt
The only tax debt that Chapter 7 bankruptcy deals with is income tax debt, and it only erases debt that is three years old or more. Additionally, those tax returns must have been filed for at least two years at the time you choose to file bankruptcy. Otherwise, the IRS might prepare a substitute return to use in calculating your arrearage. Finally, the tax assessment cannot be older than eight months or it is not dischargeable.
Filing for bankruptcy has many benefits, not the least of which is the fact that an enormous burden will be lifted when creditors can no longer hound you for payments. Nonetheless, it’s important to recognize that you will not be eligible for a Chapter 7 filing for another eight years. Additionally, a Chapter 7 filing could remain on your credit report for as long as 10 years from the date of filing. It will be a matter of public record, and there’s really nothing you can do to remove it (although it will automatically disappear after the 10-year mark).
The decision to file for bankruptcy is a big one, with the potential for both relief and challenges. To understand all aspects of making such a move, schedule a confidential consultation with the experienced Miami chapter 7 bankruptcy attorneys at the Law Office of Julia Kefalinos today.