There are many different types of debt. While a lot of people have consumer debt — from making purchases — or medical debt, tax debt is also common. Tax debt is generally owed to either the state or to the federal government. This debt accrues interest and penalties when Tennessee residents cannot afford to pay their tax obligations. Tax debt can quickly grow if people are unable to pay the amount owed on time.
Like other forms of debt, people are often in need of debt relief when they face large amounts of tax debt. However, unlike consumer debt, medical debt or other types of debt, the federal government makes it more difficult to erase this type of debt. But, with the right help, it can be possible.
In particular, a Chapter 13 bankruptcy can help a person erase their debts and get a fresh financial start. Under Chapter 13 bankruptcy — the most common form of consumer bankruptcy — the court creates a repayment play for the person. Under this repayment plan, a portion of the person’s debt is paid over three or five years. If the person sticks to the repayment plan, any remaining debt is discharged following the time period.
The IRS may be willing to dismiss part of a person’s tax debt in certain situations. They will assess a person’s assets, expenses, income and ability to pay when making this decision. In order to receive assistance in repaying back taxes during a Chapter 13 bankruptcy, people need to follow some rules. If these rules are broken, the IRS may not agree to dismiss portions of the debt. For example, people must file tax returns during the bankruptcy and must pay their taxes in full during the bankruptcy. Additionally, people must have filed all their taxes during the four years that were proceeding the bankruptcy.
Chapter 13 bankruptcy can be a good option for consumers in many situations. People who need debt relief — from any type of debt — should explore their legal options so they can move forward with their life.
Source: Fox Business, “Can I File Bankruptcy on the Taxes I Owe the IRS?,” Judy O’Connor, July 3, 2014
Tags: Chapter 13, Chapter 13 bankruptcy, debt relief, fresh financial start
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