Bankruptcy may still be an option even if you cannot discharge the debt.
The most obvious example are taxes. Taxes are an all too painful reality for most of us. We withhold our taxes from our wages but sometimes it’s not enough. We pay and continue to pay, and when we can’t afford it, the IRS becomes more aggressive and may levy our accounts, place liens on our property, or even garnish our wages.
While it’s true bankruptcy can discharge (legally write off) income tax debt in certain circumstances(discussed in another blog), in situations where you cannot discharge your tax debt, bankruptcy may be an option to give you the time in which to repay your debt. The following are five reasons why you may want some legal advice about your bankruptcy options:
1. Some debts, such as taxes, can be discharged if you qualify. Certain income taxes can be discharged in either a Chapter 7 or Chapter 13 case, depending on how old they are and a number of other factors. Even if the taxes cannot be discharged, a portion of an otherwise not dischargeable tax debt—such as the penalties—can be discharged, thus reducing the amount you need to pay. Student loans are extremely difficult to discharge, but it is available in some unique situations. Debts owed from overpayment from the Social Security Administration is another example that may qualify.
2. Some debts that can’t be discharged now may be able to be in the future. Almost all income taxes can be discharged after a number of conditions have been met. It’s important to plan these tax timing rules given your financial status, income and changing obligations. Timing issues can sometimes also be important with student loans, especially if you have a worsening medical condition or are simply getting close to retirement age.
3. Even if you can’t discharge a debt, bankruptcy can permanently solve an aggressive collection problem. In many situations your primary problem is the devastating way a debt is being collected. For example, some clients want to pay an obligation for back but the creditor’s are unwilling to cooperate and threatening them with lawsuits, judgments and levies. A Chapter 13 case will stop these threats and protect you from such harassing creditors while you pay back your debts. Back child support is another example because the court may threaten to suspend your license or require a much greater payment than what you can afford and a bankruptcy can help you restructure your repayment. A Chapter 13 takes most of the creditor’s leverage away and puts their power on hold while you pay what your budget allows, not what these creditors would otherwise be gouging out of you.
4. Bankruptcy can stop the increasingly growing interest, penalties, and other costs, allowing you to pay off a debt much faster. Unpaid income taxes and certain other kinds of debts are so much more difficult to pay off because a part of each payment goes to the ongoing interest and penalties. The Internal Revenue Service and Franchise Tax Board are all too eager to penalize you for failure to pay your taxes – and the amounts can be catastrophic When you file a Chapter 13 Bankruptcy in Riverside, most of these ongoing add-ons are stopped, thus allowing you to become debt-free sooner.
5. Bankruptcy allows you to discharge debts you can, while paying off the debts you can’t. You may have some debt that can’t be discharged and a lot of other debt that can be discharged. Even if bankruptcy can’t discharge all of your debt, discharging most of your debts would likely be enough to make life manageable. Under Chapter 7, you could wipe out or eliminate those debts that are dischargeable and focus on repaying the non dischargeable debts faster. In a Chapter 13 you would enter into payment program prioritizes the non dischargeable debt and you pay a portion or percentage of those debts that you can discharge.
In the end, it’s important to know you have bankruptcy options and you should speak to our expert bankruptcy attorney in Riverside, San Bernardino or Orange County to provide you with some answers and the help you need.
