For anyone struggling under insurmountable debts, harassment from the IRS regarding overdue taxes can be the proverbial straw that breaks the camel’s back. If both your debts and overdue tax bills seem overwhelming, it can be wise to speak with an experienced bankruptcy attorney about whether filing Chapter 13 bankruptcy might be the right choice to help you regain your financial footing.
Below, the attorneys at The Gil Law Firm in Dothan, Alabama, explain how a Chapter 13 bankruptcy case interacts with your existing tax bills, and how filing for bankruptcy can help limit difficulties with the IRS.
End IRS Harassment With Chapter 13 Bankruptcy
Priority Vs. Non-Priority Tax Debts
In a Chapter 13 bankruptcy filing, some of your debts will be classified as priority and some as non-priority. Priority debts still must be paid in full as part of the Chapter 13 payment plan you’ll prepare with your attorney, whereas some portion of your non-priority debts may be discharged as an aspect of the bankruptcy process.
Are My Tax Debts Non-Priority?
A tax debt might be classified as non-priority if it meets the following criteria:
- The debt results from unpaid income taxes. Only income taxes are eligible for discharge under Chapter 13 bankruptcy.
- The return was due at least three years, and filed at least two years, before the Chapter 13 bankruptcy filing. If you filed your return late, it can affect your ability to discharge some of your tax debt, so make sure to discuss any late returns with your bankruptcy attorney. Other time limits regarding when the tax debt was assessed may also come into play.
- You did not willfully evade your taxes. Having committed any fraud in evading your tax bill or filing your return can put your ability to discharge debts under Chapter 13 bankruptcy at serious risk.
Priority Tax Debts Under Chapter 13 Bankruptcy
Even for priority debts, Chapter 13 bankruptcy offers some advantages. As with other priority debts, your Chapter 13 bankruptcy case will include a payment plan to eliminate your tax debt over a number of years. Once the plan has been approved, the IRS can’t harass you as long as you abide by the plans terms and keep your payments coming in on time.
If you are considering filing for Chapter 13 bankruptcy to end IRS harassment or to consolidate your other debts, seek out the advice of an experienced bankruptcy attorney. In Dothan, Alabama, that means The Gil Law Firm. Visit their website for more information or call (334) 673-0100 today to schedule a consultation!