While the bulk of taxes are unavoidable in bankruptcy, some are. Fong Law Group can review your situation to see whether the tax bill can be forgiven. Though complicated, applying for Chapter 7 bankruptcy and determining if your obligations are dischargeable may help you get rid of some unpaid taxes.
Bankruptcy and IRS
There is a distinction between tax debt and liens. Tax debt is money owed to the state or the IRS. A lienholder is a judicial judgment that is lodged against the assets to fulfill a tax debt owed to the state and federal government. If you file for bankruptcy and complete all of the requirements, earlier tax levies will not be removed.
The amount will be dismissed, but not erased, from your duty to pay it back. So, the IRS can't seize your assets or bank accounts.
But, if you declared bankruptcy before a lien was issued, the lien may stay on the land. If you wish to sell the home in the future, you'll need to settle the lien first.
A device known as the automatic stay halts most legal processes and prevents lenders from pursuing collection methods once you apply for bankruptcy. It ensures lenders can't charge you, seize your wages, charge you, or contact you to recover the money you owe. The IRS is also subject to the auto-stay. The IRS can't issue you collecting debt notifications, garnish the income or savings balance, or even credit the tax refund when an effective system is in effect.
Debt Accrued after Declaring Bankruptcy is Not Subject to the Automatic Stay
The auto-stay protects you against creditors who are attempting to recover the debt that you accrued before filing bankruptcy. The automatic stay doesn't preclude creditors from attempting to collect the debt you acquired after filing for bankruptcy, known as "post-petition debt." The automatic stay will not prohibit the IRS from seeking to recover if you acquired tax liability after declaring Chapter 7 or 13 bankruptcies.
What Occurs to a Tax Liability That Isn't Dischargeable?
If you reside in Monterey Park California and surrounding areas, contact Fong Law Group for more information on the case.
If you declare bankruptcy, your tax liabilities are addressed differently.
- Chapter 7 bankruptcy. Excluding the obligatory stay, bankruptcy proceedings have little impact on non-dischargeable tax debts. The bankruptcy matter will be closed by the court clerk when the bankruptcy judge approves the dismissal. The IRS would be allowed to continue collection operations if the bankruptcy filing does not dismiss the IRS tax liability.
- Chapter 13 bankruptcy. You may employ a Chapter 13 repayment plan to deal with non-dischargeable debt. You'll suggest a 3- to 5 year payment plan for the IRS obligation (together with other bills). Your previous unpaid IRS obligation will still be discharged, and the non-dischargeable bill will be fully paid.
Call Fong Law Group at (626) 289-8299 for a FREE consolidation, and talk to an attorney today. We are here to help you get through this difficult time in your life, and help you with a Fresh Start.