You have some tax debt that you find overwhelming. On top of that, some poor investments have put you behind on your other bills. You have thought about bankruptcy, but do not know if it is something that can help you.
When considering a bankruptcy filing, it is a good idea to know what types of debt it takes care of. In the most common bankruptcy filings, 7 and 13, some debts discharge while others do not. Tax debt is one of the trickier things to deal with. Hiring an experienced bankruptcy attorney in New Hampshire will help you understand the ins and outs.
Chapter 7 bankruptcy may discharge tax debt
When going the Chapter 7 bankruptcy route, you lose assets and eliminate some debt. Tax debt is one thing that may wind up cleared, but all the following must apply:
- You filed proper returns the previous two years
- The debt is income tax
- You did not commit fraud or evade taxes
- The age of the tax debt is greater than three years
- The debt assessment occurred 240 days prior to bankruptcy filing
If even one of these statements is not appropriate for your situation, your tax debt will remain against you.
Chapter 13 bankruptcy does not discharge tax debt
Chapter 13 bankruptcy is a different type of filing from Chapter 7. It is a restructuring of your debts. During the proceedings, you meet with representatives of all the creditors against you and work out a payment plan that suits everyone. Your tax debt is part of this proceeding, and while it may not go away, it may become smaller and more manageable.
Filing bankruptcy is a tough decision, but with the proper guidance, you can emerge from it with less debt or no debt at all. Your tax burden may lighten or go away, depending on which of the two filings work best for you.