Tax time can be a stressful time, especially if a tax liability is the end result. If a client has tax liability, we often look at a Chapter 13 bankruptcy filing to help our client resolve the tax debt.
2018 Tax Liability:
If a client owes a tax liability from 2018, filing Chapter 13 bankruptcy could provide the following relief:
a. Provide the opportunity to pay the debt in full through a Chapter 13 plan
b. Obtain financial flexibility
c. Resolve tax liens and collections on 2018 taxes
Tax Liability for Previous Years:
Chapter 13 bankruptcy can be a powerful tool for dealing with taxes that our clients owe for the current tax year, as well as tax debt that has been incurred in prior years. As a general rule, if a tax liability has been incurred more than three years prior and the return was filed on time, the debt can often be treated as a unsecured debt (and discharged at the end of the plan).
Collections and Monthly Payments with the IRS:
When a bankruptcy is filed, the “automatic stay” is put in place and will remain throughout the duration of the plan. This means the IRS cannot continue any collection efforts while the stay is in place. In addition, the plan is based on household income and expenses, so it is an effective way to obtain an affordable repayment plan.
In any of the above scenarios, Chapter 13 bankruptcy offers a viable solution to many types of tax debts for our clients. Please contact the team of Wood & Brewer, LLC today for your free consultation. We are here to help!