Dayton Bankruptcy Lawyers Help Individuals Facing Bankruptcy
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Tax debt is one of the most common reasons for filing bankruptcy, especially for anyone who owns a sole proprietorship. These small businesses operate without incorporation and are considered your primary source of income. But, pitfalls abound both for the small business owner and for the individuals that find themselves indebted to the IRS.
Tax debt is also one of the most prolific sources of debt in that penalties and interest can mount up at unbelievable speed until the balance due is overwhelming. Unfortunately, resolving debt by interacting directly with the IRS can be a terrifying and frustrating experience. Also unfortunate is that the reforms to the bankruptcy system enacted in 2005 made getting rid of IRS debt via bankruptcy more difficult than before the changes. Dayton bankruptcy attorneys have the expertise and experience to advise you on these complex reforms.
Most tax debt cannot be discharged with a Chapter 7 or Chapter 13 bankruptcy. With a Chapter 13 plan initiated with bankruptcy lawyers in Dayton, you will still owe the tax debt at the conclusion of your plan and the owed amount will be part of your payments. In a Chapter 7, some of this debt may be wiped out, but only if you meet very specific criteria:
· A tax return was filed on the debt – The tax debt you want to discharge must have had the appropriate returns filed at least 2 years before filing a bankruptcy petition.
· The taxes owed are income taxes – trustee taxes (payroll taxes), penalties and other kinds of taxes are not eligible for discharge.
· The tax debt is at least three years old – the debt you wish to discharge must have been owed for at least 3 years before the bankruptcy was filed.
· No fraud or willful evasion – if you filed a fraudulent income tax return or otherwise committed fraud, such as willfully evading paying income taxes, bankruptcy will not discharge any debt connected with this.
· The 240 day rule – the IRS must have assessed this income tax debt at least 240 days before the bankruptcy is filed or the debt must not have been yet assessed by the IRS. If the IRS stopped the collection of this debt because of an offer of compromise or a prior bankruptcy filing, this deadline may be extended.
Recorded federal tax liens will remain on your record even if the taxes themselves are discharged. The bankruptcy process does prevent the IRS from pursuing collection methods on the discharged taxes, but because the liens remain, if you want to sell that liened holding, you must first pay off the lien. Dayton bankruptcy attorneys can provide further information on bankruptcy and the IRS.
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