Declaring Bankruptcy

Bankruptcy is a legal way to get rid of tax debt. Consider it a last resort. It won't fix your IRS issues and will affect your and your family. Explore the possibilities.

There are two types of bankruptcy. Straight bankruptcy (Chapter seven) allows liquidation of the debts. You have the chance to repay some debts and eliminate the rest through a payment plan (Chapter 11, twelve, or thirteen).

So, what to doabout tax debts? For your tax debts to be discharged, there are 5 criteria that must be met. These criteria are:

• Tax return deadline – minimum of 3 years before declaring bankruptcy
• Before declaring bankruptcy, tax return should've been filed at least 2 years before.
• Tax assessment is 240 days old, minimum.
• Not fraudulent tax return.
• Not guilty of tax evasion

Discharge isn't relevant to all tax debts. Obviously, tax returns that weren't filed can't be discharged. Before your case can be heard before the creditors' meeting, you should have filed your tax returns from the last four years. You will be required to furnish a copy of the most recent tax return to the bankruptcy court and the creditors have every right to ask for a copy of it too.

You have to be prepared for the long term repercussions of bankruptcy on you and your family. It'll be on your credit report for as long as ten years. This could hinder your ability to obtain loans, establish new lines of credit, lease an apartment, or change jobs, in some cases.

Consult qualified professionals before declaring bankruptcy, as it is a complicated process and changes are being considered.

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Originally posted 2007-12-23 04:18:43. Republished by Blog Post Promoter

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