First of all, if you are contemplating filing any form of bankruptcy it is imperative that you are up to date with filing all of your federal tax returns with the Internal Revenue Service and it is strongly recommended that you keep legible copies of all of your federal tax returns that have been filed.
Sometimes, the issue is that you have not been able to pay your federal, state or other tax debt. This is when a chapter 13 bankruptcy can really help you. In most cases, an individual can include to be paid in a chapter 13 plan all back tax debt that they have not been able to pay. There can be quite a few benefits to handling back tax debt in a chapter 13. The automatic stay that goes into effect immediately upon the filing of a Chapter 13 bankruptcy can stop the Internal Revenue Service from freezing future refunds that come due to you. (See my blog post from September 24, 2012 for more information on the automatic stay). An additional benefit of including and paying past due tax debt in a chapter 13 debt consolidation plan is that in most cases interest and penalty stops accruing on the pre-petition tax debt included in the Chapter 13 Plan.
Generally, back tax debt is non-dischargeable in any form of bankruptcy. However, in some instances back tax debt can be determined dischargeable (wiped out). There are quite a few factors involved and this can be a more tedious and complicated process. It is best to seek the assistance of legal counsel to determine how to best help you with your back tax debt.
If you are struggling with back tax debt or your financial situation in general please take the step to contact our office nearest you and schedule a confidential and free initial consultation with one of our licensed attorneys.
Amy K Tanner is a shareholder in several of the Bond & Botes Law Offices. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She focuses primarily on consumer bankruptcy law in the Huntsville and Decatur offices.Read her full bio here.