If you’ve gotten behind on your debt, then you know this is a serious situation. Take this extreme case as an example: The actor Sinbad once declared Chapter 7 bankruptcy to get out of his $11 million debt and $8 million of that consisted of taxes. It’s likely that you’re not looking at an $8 million tax bill but if you owe more than you can pay, then it may as well be $8 million. The good news is that a bankruptcy attorney may be able to help you.
You may be able to discharge state and federal income tax debts
If you owe state and / or federal income taxes, then you’ll be glad to know that these are actually the easiest types of tax debts to discharge. Start by finding out if you qualify for Chapter 7 bankruptcy by looking at the requirements. If you do, then you can use Chapter 7 to discharge income taxes – but only if they’re at least three years old and you must have filed the return two or more years ago.
When you come to meet with The Law Offices of Paul Y. Lee, bring your tax documents with you. We’ll provide a free consultation and can take a look at your situation to advise you on the best options for moving forward.
How to handle other tax debts
It can be much more challenging to handle tax debts that aren’t related to your income. In most cases, you won’t be able to discharge these types of tax debt completely, but you can stop the IRS’s collection efforts if you file Chapter 13 bankruptcy. This type of bankruptcy involves a judge creating a payment plan that you can use to get your debts paid off over three to five years.
While this is happening, the IRS isn’t able to continue assessing interest charges or additional penalties based on those back taxes. They’ll also have to stop with other attempts they’re making, such as property seizure or wage garnishment.
What can you do about property taxes?
You’re not going to be able to discharge any unpaid property taxes that incur within a calendar year of the day you file bankruptcy. However, you may be able to discharge older property taxes. If you do, you’ll likely end up with a lien on your property and you’ll have to pay that lien in the event you sell your property.
If you owe back taxes and want to get more personalized advice on what your options are, then we welcome you to call The Law Offices of Paul Y. Lee at 951-755-1000 right away.
