Bankruptcy - Can Taxes Be Eliminated, Do I Have To Be Broke To File Bankruptcy

Bankruptcy - Can Taxes Be Eliminated, Do I Have To Be Broke To File Bankruptcy

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Is it true that taxes cannot be eliminated in bankruptcy?

That is not true. In fact, we have seen several cases where taxes were eliminated in bankruptcy.

The key is how old the taxes are, when the returns were filed and whether the taxes have been assessed. That is really the test for income taxes.

For example, you have taxes that you filed over three years ago, and they have been assessed, meaning theres a determination as to the amount owed and the penalties that were going to be incurred for what is owed. And they are income taxes. Then you could put them into the bankruptcy and request that they be discharged.

Now it also depends on other factors. What kind of taxes are they? Income taxes versus say property taxes or corporate taxesthey each have their own criteria for when they can be discharged.

For most people the concern is income taxes.

So age is important and the assessment, which comes from the IRS, is the most important.

With that, also, on the federal taxes and the state taxes, they both could be eliminated in bankruptcy. If you werent able to eliminate them, you may want to consider a Chapter 13, which would allow you to discharge your unsecured debt. For example, you credit card debt and only pay your taxes.

That can really help people when their taxes have been assessed by the IRS or theyre not old enough or a combination of both and they also have a lot of credit card debt. Theyll receive the protection of the bankruptcy court, which means the IRS couldnt garnish them. Then they pay their taxes through the bankruptcy plan. After five years or three years, depending on how much is owed, they would be done with it and there wouldnt be any other debt theyd owe.

So theres usually a very good solution. To say they cant be eliminatedthats simply not true.

Is it true that I must be broke to file bankruptcy?

Thats such a good question. Everyones definition of broke is something different. But you dont have to be flat-out broke without a job. You should be at your lowest financial point, which we have seen clients who were making $250,000 a year and now theyre making $100,000 a year. I can tell you they think theyre broke. Absolutely.

There have also been people whove gone from making $80,000 a year to making $30,000 a year. They also think that theyre broke.

Depending on what your definition of broke is, you dont have to be flat out without a job, but you should be at your lowest financial point.

If you feel that youve met that or the other issue is for example, a single person. Im making $45,000 a year, which is going to qualify me for a Chapter 7 automatically. I have about, $20-25,000 of debt. Thats almost half of my income.

Now my incomes pretty healthy at $45,000 for a single person, but I simply cant get over that hump of $20-25,000 of credit card debt. Is it a good idea that I file, even though I have an income and its on-going?

Yes, it is.

So dont think you need to be unemployed or homeless or not own any property, by no stretch of the imagination. Whats really sad is when people let themselves get to that point because they think thats where they need to be before they file bankruptcy.

Or sadly, they liquidate all of their retirement because they believe that they cant have a retirement protected in bankruptcy. Or they allow their house to go into foreclosure rather than attempt to protect it in bankruptcy.

So really bankruptcy is about protecting your assets, getting rid of your debt, and getting a fresh start. But its not about being without anything or not having a job. You dont even have to hit that low point because thats not where bankruptcy wants you to be.

So, no, you dont have to be broke to file bankruptcy.

About the Author:
To get additional information on debt settlement and bankruptcy options please visit our web site. We would also like to offer you a free online debt evaluation. You can claim your free online debt evaluation at http://arizonalegaladvocacy.com.



Christy Thompson, your Chandler Bankruptcy Lawyer



Article Originally Published On: http://www.articlesnatch.com


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