Can I File Bankruptcy if I Owe Money to the IRS?
Dealing with financial difficulties and debts you cannot pay is extremely stressful, especially when you owe money to the IRS. The thought of filing for bankruptcy might have crossed your mind as a possible solution to your debt problems, but you may be wondering if it is even possible to do so when facing tax obligations.
The good news is that it is possible to file for bankruptcy while owing money to the IRS. However, complying with bankruptcy law and dealing with the IRS can be incredibly challenging. That is why you should always seek the assistance of a reputable South Carolina bankruptcy attorney from Reed Law Firm. We will find the best solution for your financial situation.
Understanding Bankruptcy and the IRS
Bankruptcy allows you to seek relief from overwhelming debts by obtaining court protection, reorganizing your finances, and, in some cases, having your debts discharged in exchange for certain property. When some of your debt is to the IRS, bankruptcy can provide some relief, but it doesn’t eliminate all tax obligations.
There are two common types of bankruptcy individuals can file: Chapter 7 and Chapter 13. Chapter 7 bankruptcy, also known as liquidation bankruptcy, allows individuals to discharge most of their debts, including some tax debts. Chapter 13 bankruptcy, on the other hand, known as reorganization bankruptcy, involves creating a repayment plan to pay off debts over a period of time.
Filing Bankruptcy with Tax Debts
While bankruptcy can help with some tax debts, there are limitations. To be eligible for bankruptcy relief for taxes, there are many considerations, including:
- Filing recent tax returns: You must have filed your tax returns for the past few years. Failing to file tax returns can make you ineligible for bankruptcy relief.
- Age of tax debts: This means that the tax return associated with the debt must have been filed at least three years before filing for bankruptcy.
- No fraudulent activity: If you engaged in any fraudulent activity related to your taxes or attempted to evade paying taxes, you may not be able to discharge those debts through bankruptcy.
- Only federal or state income taxes: Some tax debts are considered priority debts and cannot be discharged. These may include taxes you withheld from your employees’ wages and trust fund taxes.
Have a South Carolina Bankruptcy Attorney Review Your Tax Debt
If you owe money to the IRS, seek the assistance of a reputable South Carolina bankruptcy law firm. Reed Law Firm can review your situation and advise you on whether bankruptcy can help you deal with tax debts.
Contact our bankruptcy attorneys today for a free and confidential consultation. Let us guide you through the process and help you rebuild your financial future.
