Taxes & Bankruptcy 
Discharging Taxes and Tax Debts in Bankruptcy
If you have ever wondered how bankruptcy affects tax debts, then we suggest contacting Marty Martin now for assistance. Contrary to popular belief, you may be able to discharge taxes in bankruptcy. The rules governing income taxes are spelled out in the bankruptcy code under 11 USC 523. To be dischargeable the taxes must have been due at least 3 years ago. So, if filing on April 16, 2012, you may potentially discharge 2008 taxes and prior.
Further, the taxes must have been filed at least 2 years ago. And by filed I mean that you or your CPA filed them, not the IRS or state tax commission. If they filed them then you will not be able to discharge them unless you, if not too late, file an amended return and wait the two years out.
The third requirement related to discharging personal income taxes due is that the assessment must not have come within the past 240 days. This rule is the most tricky one because many factors come into play here. Say for example you are audited and are hit with an assessment and you appeal that assessment. In that case the 240 days do not start running until after the appeal is concluded and you are assessed. Additionally, if you submit an offer in compromise, the 240 days do not run during the time the IRS is considering your offer. Moreoever, once the offer in compromise is decided you have to wait an additional 30 days on top of the 240 days before the tax liability is dischargeable.
Last, but not least, if you are found to have filed a fraudulent return or willfully attempted in any manner to evade or defeat the taxes owed your tax liability will not be discharged regardless of the above factors.
Tax Liens
Keep in mind that even if you are able to discharge a tax debt as described above, if you already have a tax lien against your property or other asset, that lien is not going to go away by filing bankruptcy; even if you are able to discharge the underlying tax liability. I can talk to you about this if it applies and, perhaps, work out some arrangement to have that lien lifted before you file. However, even if you do have the tax lien remaining on your property, the lien will go away after 10 years.
Property Taxes
Any property taxes are dischargeable after one year from when a penalty begins accruing. The same caveat stated above in regards to tax liens applies here. However, keep in mind that you will be able to repay the property taxes (and income taxes above for that matter) interest and penalty-free on your terms and once they are paid the liens will be removed.
Will the IRS Take My House If I Have a Tax Lien?
Yes they can but it is rare. The last thing the IRS wants to do is go to the trouble of taking and selling your house. They would much rather go after low-hanging fruit like wage garnishments or bank account levies. But, if you have substantial equity in your house, take steps now to plan for a way to deal with the problem. Your tax problems will not go away by themselves. I have effective ways to deal with the IRS and/or the Oklahoma Tax Commission.
Deciding To Hire a Lawyer for Debt Settlement
Dealing with creditors when you owe a lot of debt can be overwhelming. Juggling the legal documentation and speaking to creditors in a way that positively helps your case can be incredibly challenging, especially if you have no experience in the matter. You might wonder if you need a lawyer to help settle your debt or if you can hire a debt settlement company. Here’s some factors on deciding between a lawyer, settlement company or yourself:
Lawyers Have Experience
Hiring a bankruptcy lawyer to learn how bankruptcy affects tax debts, means that you’re getting the right legal experience on your side. Many people don’t know the legal implications of debt or how difficult it can be to negotiate with creditors. An attorney with excellent experience can go over all the options for how to deal with your debt, and they can represent you if you get sued.
However, when picking out a lawyer, it is essential to make sure you have a good one with experience. There are plenty of lawyers out there who aren’t licensed and may even work for settlement companies. Check a lawyer’s credentials when choosing one, and meet in person before hiring them.
Settlement Companies Require Fees
Settlement companies can be hired to help settle your debt, but a few problems can arise with them. First off, you have to pay them a fee each month for their services, as well as money that they set aside to pay off your debt eventually. The fees can stack up quickly, as they may charge more than one. As a result, your debt may actually grow instead of shrink. It may be a better idea to simply use that money to pay off your debt rather than give it to a company. After all, settlement companies are in it to make money, and your debt might not even get settled by the end of the process.
Some Situations Can Be Settled by You
If you feel confident that you can settle your debt, and there are no other major issues with creditors, you may be able to do so on your own. This can be beneficial in saving you money, especially if you are not being sued by creditors. This is a good option to consider if you feel up to the task.
You can always reach out to a bankruptcy lawyer if you are unclear on what to do. At the very least, you can schedule a short consultation appointment to discuss your options. If you are in need of help regarding how bankruptcy affects tax debts, call Marty Martin now.
Client Review
“Mr. Martin knows his stuff and helped me through the process. He put up with me asking a thousand questions and all my changes. I will recommend him to anyone who needs a bankruptcy attorney. The process was smooth and the fee is less than most attorneys in this industry in the okc metro.”
Stephanie H.
