CALL NOW!
FREE PHONE/VIRTUAL CONSULTATION

How Chapter 13 Can Help You with Taxes

In many cases tax debts are non-dischargeable in a bankruptcy. Running up a tax debt and expecting to not have to pay it by filing for bankruptcy won’t work, so before you do anything that affects what you’ll owe Uncle Sam, make sure you consult with a credit expert or attorney. This is especially true when it comes to settling credit card debt for less than the total owed because the forgiven amount is taxable income.

Despite the limitations concerning tax debt and bankruptcy, there are instances in which bankruptcy will help with your tax debts. Filing for chapter 13 bankruptcy might actually be one of the most powerful tools you have for dealing with tax problems because it allows you to pay recent taxes interest free, discharge penalties, eliminate or reduce liens related to unpaid taxes, and discharge old tax debts entirely.

Of course, how much chapter 13 will help you overall varies from person to person, and in some cases, if you qualify, you might be better off foregoing the tax benefits for the relief complete discharge offers in chapter 7.

You and your attorney should review your specific situation and determine the best option for you.

What You Should Know about Chapter 13

Before you decide how to proceed, it’s a good idea to get a general overview for how chapter 13 bankruptcy works.

Chapter 13 is an option for those who are struggling with debt and who have a way in which to make controlled monthly payments toward that debt. Entering into chapter 13 means committing to a payment plan for three to five years that is approved by and overseen by the court.

Keep in mind the payment plan will be strict. Don’t expect to be spending on extravagant vacations and other luxuries while putting just a small portion of your income toward the payment plan. Instead, you’ll be committing to pay all of your excess money toward your debt once your living expenses are paid.

Chapter 13 helps with tax debt because certain types can be included in the payment plan. This means the IRS can end up getting all of the money they are owed, just a portion of it, or nothing, depending on a number of factors, including:

    • Debtor’s living expenses
    • Other debts
    • Value of exempt and non-exempt property

There are also certain stipulations that determine whether or not a debt is considered a priority. This means it will need to be paid in full and cannot be discharged in a bankruptcy filing. If a tax debt is not a priority, it can be discharged upon the completion of the payment plan. This includes the taxes, the unpaid interest, and any penalties incurred.

To learn more about priority and non-priority tax debts, check out this information from Nolo.com.

Benefits of Using Chapter 13 to Deal with Tax Debts

Filing for chapter 13 bankruptcy can provide several benefits related to tax debts, including:

      • Creating a realistic repayment schedule
      • Discharging old taxes and penalties
      • Removing tax liens
      • Fast and affordable resolution to a serious problem
      • No additional tax consequences – you won’t be taxed on the amount forgiven if a tax debt is discharged or not paid in full

One additional important detail:

In order for taxes to be included in a bankruptcy plan, you’ll need to have filed your tax returns, even if you did not make a payment. Any taxes more than three years old for which you did not file a return are non-dischargeable or a priority, with the exception of those assessed within the last 240 days before you filed for bankruptcy.

No matter your financial situation, make sure you file your tax returns, and if you have back taxes that haven’t been filed, talk to an attorney about filing before you begin the bankruptcy process.

If you’d like to discuss your tax debt and learn how bankruptcy could help or you have other questions about bankruptcy, contact the Law Office of Robert M. Geller at 813.254.5696.

Archive

Video Testimonials

Tampa Bankruptcy Law Blog

5 Common Budgeting Mistakes Newlyweds Make and How to Avoid Them

Budgeting mistakes are common, especially when you’re young. Not all newlyweds are young adults, but many first-time marriages do involve...
Read More

When Should Married Couples File for Bankruptcy Together?

There's no easy answer to the question of timing when it comes to bankruptcy. In some cases, it may make...
Read More

Can Your Spouses Debt Force You Into Bankruptcy?

If you're married and your spouse has a lot of debt, you may be wondering if that debt can force...
Read More

Do You Need a Bankruptcy Attorney If You’re Divorcing with Financial Problems?

Divorce and bankruptcies are more common than many people realize. Financial problems make a stressful transition even more difficult. If...
Read More

Can You File Bankruptcy without Your Spouse?

Filing for bankruptcy is a decision that should not be taken lightly. It can affect your financial life and the...
Read More

How Seniors Can Avoid Bankruptcy

Seniors are at a high risk of bankruptcy, but there are ways to avoid it. What do you need to...
Read More

What Happens If I Own Too Many Assets to File for Chapter 7?

Does hiding assets in bankruptcy protect them from your creditors? If you own too many assets to qualify for Chapter...
Read More

How to Find the Best Lawyer for Filing for Bankruptcy after Retirement

Many retirees decide to file for bankruptcy as a way to get a fresh start. But finding the right lawyer...
Read More

Does Declaring Bankruptcy Affect My Retirement Savings?

When you're struggling with debt, the thought of bankruptcy might cross your mind. But what would that mean for your...
Read More

Is a Reverse Mortgage Right for Me?

Reverse mortgages in Florida are loans that allow homeowners 62 and older to borrow against the equity in their homes....
Read More

Bankruptcy

For The Next 5 Days GET A FREE BOOK About Bankruptcy

Learn More

Infographics

We are A Debt Relief Agency.
We help people file for bankruptcy under the Bankruptcy Code

Pay Online Bankruptcy Courses Newsletter Subscription

NACBA Logo avvo1 avvo2 avvo3 LEA BBB Logo

Call For A Free Initial Consultation

813.254.5696

Tampa Office

Law Offices of Robert M. Geller, P.A.
807 West Azeele Street
Tampa, FL 33606
T: (813) 254-5696
T: (800) 853-7549
F: (813) 253-3405

Map And Directions

St. Petersburg Office

Law Offices of Robert M. Geller, P.A.
125 5th Street South
(Wells Fargo Financial Center)
2nd Floor, Suite G
St. Petersburg, FL 33701
T: (727) 532-3939

Map And Directions

Pasco Office

23526 State Road 54
Lutz, FL 33559
T: (813) 336-2320

Map And Directions