The Answers to IRS & Bankruptcy Questions

When filing for personal bankruptcy, it doesn’t matter if it’s a Chapter 7 or a Chapter 11–you’re still bound to have myriad questions about how it works, what to expect, and how it will impact your balance due to the IRS. Happily, those questions can be answered by an experienced Miami bankruptcy attorney. Until then, here’s a taste of what to expect:

Q:  I’ve heard the terms “discharge” and “dismissal.” Are they the same thing?

A:  No, these are two very different things. While a dismissal relates to the ending of the bankruptcy proceedings, a discharge provides partial or total relief from specific debts that have been granted by the court.

Q: Will my spouse still get bills if I am in bankruptcy?

A:  It’s possible, yes. That’s because if you filed individually, your spouse won’t be automatically protected by the bankruptcy rules. However, any community property will be protected.

Q: What is an OIC (offer in compromise)? Might I be eligible for that help?

A: An OIC is a deal with the IRS that allows someone to settle past tax debts at a reduced level. No, once you’ve opened a bankruptcy proceeding, you will no longer be eligible for any offer in compromise agreements.

Q: Can I get rid of a lien on my property if I’m in the middle of bankruptcy?

A: Yes, you can. The easiest way to eliminate a federal tax lien is to pay any tax debt you may have. There’s also the possibility of reducing the weight of a lien through either:

• Subordination;
• A property discharge;
• A lien withdrawal.

Q: Is it possible to make payments while in bankruptcy?

A: Maybe. Depending on your circumstances, you may be able to make voluntary disbursements that would apply toward any debt unrelated to the discharged debt if you are in a Chapter 7 bankruptcy.

Q: How are payment arrangements set up?

A: Payment options are determined by your status in bankruptcy, the court jurisdiction handling your case, and the specifics of your tax situation.

Q: When I finish up with bankruptcy, can I have an installment arrangement to make payments on tax debt?

A: Yes! Assuming you’re a qualified taxpayer, you could apply for an installment plan that is either short- or long-term, depending on the total in arrears including the tax, interest, and penalties.

Q: What if I had an installment plan prior to the bankruptcy? Can I return to the same agreement post-bankruptcy?

A: Yes. Your plan was suspended during your bankruptcy, and the account can be reviewed to determine whether it’s appropriate to reinstate it or revise it.

Advocating for You

The knowledgeable bankruptcy attorneys at The Law Office of Julia Kefalinos understand how overwhelmed you may be when filing for bankruptcy, and always work to achieve the best possible outcomes for you. To discuss, contact our Miami office today.

Source:

irs.gov/businesses/small-businesses-self-employed/bankruptcy-frequently-asked-questions