You may have heard that tax debts are not eligible for bankruptcy. While there are some tax debts that are not eligible for resolution in bankruptcy, there are instances in which a tax debt does qualify for help. Here is what you need to know about tax debts in bankruptcy:
Avoiding The IRS
Many people make the mistake of ignoring the IRS until they receive a threatening letter or notice of wage garnishment over a back due tax bill. What most people don’t know is that the IRS offers a few ways to resolve your tax debts directly. The Offer In Compromise program can settle tax debts for pennies on the dollar, while the installment plan can space out your payments over several years. However, dealing with the IRS is not always effective, especially if you are in serious tax debt trouble.
Filing for bankruptcy can help resolve your tax debt problems, but there are some eligibility requirements:
- They must be income taxes, not business or property taxes.
- The taxes must have a return on file with the IRS.
- The debts have been assessed by the IRS prior to your filing.
While it is not required that your income tax debts be less than $10,000 and/or older than three years, debts that fit this additional criteria do have a better chance at being resolved in bankruptcy. Further, tax debts will be considered a priority debt in bankruptcy, meaning that you are likely going to have to make some repayment or liquidation concessions to resolve the debt. However, debts of this nature are prone to exceptions to the rule. Therefore, consulting with an experienced Dayton bankruptcy attorney can help you determine what your options are and even help you negotiate with the IRS outside of a bankruptcy filing.