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One of the purposes of filing for bankruptcy is to discharge debts. Bankruptcy can help you achieve this goal by eliminating your liability for various debts. Debts that fall into this category are called “dischargeable debts.” There are some situations where tax debts are dischargeable, including tax debts, but strict rules and criteria apply. Philadelphia bankruptcy attorneys explain when an IRS tax debt is dischargeable for Pennsylvania filers.
Can Back Taxes Be Included In Bankruptcy
Bankruptcy provisions are generous when it comes to debt relief. Many debts are dischargeable in both Chapter 7 and Chapter 13 bankruptcy, the two most common types of bankruptcy for individual debtors. Debts that are dischargeable in Pennsylvania bankruptcy cases include debts from:
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Tax debts are unique in that they are sometimes dischargeable and sometimes nondischargeable, depending on the specifics that need to be evaluated on a case-by-case basis. The ability to repay a tax debt depends on the age of the debt, the nature of the debt and other factors, which are explained in the next section. Continue reading to learn more about the tax debt discharge requirements for personal bankruptcy as a Pennsylvania resident.
Bankruptcy and taxes have a complicated relationship. Tax debt is only dischargeable under very special circumstances, so it’s a good idea to have a Philadelphia Chapter 7 lawyer or a Philadelphia Chapter 13 attorney review your financial records before you decide to file for bankruptcy in US court in of bankruptcy cases for the Eastern District of Pennsylvania. . If you assume that your tax debts are not repayable, you may miss out on a significant debt write-off.
The reason is that most of the tax debts listed above are priority debts, like child and spousal support. As the name suggests, priority debts take priority in a bankruptcy case. If you file for Chapter 7, creditors with priority claims will be among the first to receive payment from the trustee after the sale of non-exempt property. If you file for Chapter 13, you must pay your primary debts in full.
Related to income taxes, an exemption may be possible subject to certain conditions. To file for Chapter 7 or Chapter 13 bankruptcy for income tax debt, the debt must meet the following criteria:
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Do you have to pay income tax to the IRS, but don’t know how you’re going to pay? Bankruptcy can be a practical solution if you don’t qualify for installment agreements or other IRS tax relief programs. The Pennsylvania bankruptcy attorneys at Sadek Bankruptcy Law Offices Law Offices can help. Serving Philadelphia, Bucks, Delaware, and Montgomery counties, our skilled team of attorneys has helped thousands of Pennsylvanians use Chapter 7 or Chapter 13 to obtain debt relief, protect their assets, and regain control of their financial lives.
To review your bankruptcy filing options during a free, confidential legal consultation with a Montgomery County Chapter 7 or Montgomery County Chapter 13 attorney, contact Sadek Bankruptcy Law Offices at (215)-545-0008 today. We represent individual debtors, married couples who wish to file for bankruptcy jointly, and small business owners.
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Bankruptcy will not eliminate income tax debt if you failed to file a tax return or intentionally evaded taxes. Tax returns filed with the IRS on your behalf are not considered tax returns required to settle a tax debt.
Property taxes can only be paid if they were paid more than a year before you filed for bankruptcy. But even if your personal property tax liability is lifted, the IRS will still have a lien on your property to pay those taxes. This means that even if you don’t have to pay property taxes now, before you can sell your home, you will have to pay.
How To File For Bankruptcy: Chapter 7 & 13
To learn more about whether Chapter 7 bankruptcy or 13 bankruptcy is your best option, schedule a free, confidential bankruptcy consultation with a Colorado bankruptcy attorney today. Our online scheduling system allows you to schedule a bankruptcy consultation at a time that is convenient for you.
We are Denver, Colorado bankruptcy lawyers. Our attorneys can safely guide you through Chapter 7 and Chapter 13 personal bankruptcy.
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While we cannot guarantee specific results, we want you to be satisfied with our services. We strive to be the best bankruptcy attorneys in Denver, Colorado. We want you to be able to recommend us to friends and family. We want you to feel like you got the best representation.
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A few years ago I had a client who needed to file for bankruptcy and was deeply in debt to the government for unpaid income taxes.
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The IRS and state tax authorities were after him, threatening to garnish wages. He was scared because his income was barely enough to get by each month.
His problems were compounded because he had never filed a tax return for years. As a result, the IRS calculated all tax debts based on its calculations, not his.
The Statement of Financial Affairs for Individuals Filing Bankruptcy, one of the documents you’ll need to fill out to file for bankruptcy, asks for your income for the past two years. Of course, this means you’ll need to get this information, and tax returns are usually the quickest place to look. But of course you can get this information without a completed tax return. However, collecting data is more difficult.
In addition, you are required by law to list all of your assets, including any tax refunds you may receive. If you still have to file a return, you don’t know if the government owes you money (many of my clients thought they owed money on taxes, then found out they were wrong). Also, if you don’t list the refund, you’ll lose your right to claim it after your bankruptcy case closes.
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However, the problem of unfiled taxes in a bankruptcy case hits you square in the face if you file Chapter 13.
Pursuant to the US Bankruptcy Code (11 USC 1308), you are required to file tax returns for all tax periods ending within the 4 years ending on
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