IRS Tax Bankruptcy

I see a lot of people that get into trouble with the IRS and Franchise Tax Board for unpaid taxes. Some people adjust their tax withholdings so that they withhold not enough taxes from their wages. This can help with a temporary financial situation, but failing to re-adjust the withholding can result in a large tax burden.

Luckily, there are bankruptcy options that can help resolve tax issues.

Not All IRS Tax Debts Are Dischargeable

In a Chapter 7 bankruptcy, a person discharges their unsecured debts. In some cases, tax debts can be included in that discharge. The rules here are complicated and are meant to provide relief to innocent people that can’t realistically repay their tax bills. I have written about the rules for tax discharge before, so I won’t cover that here.

If not all of your tax debts are dischargeable in a Chapter 7 bankruptcy, there still are bankruptcy options available to you.

Chapter 13 Bankruptcy Helps With Tax Debts

The IRS imposes interest and penalties on unpaid tax bills. If you don’t address your tax debts soon, the interest and penalties will grow quickly. Even getting on a payment plan with the IRS doesn’t stop interest or penalties. This can make it difficult to repay your tax debt to the government.

Chapter 13 Bankruptcy can help! The IRS and Franchise Tax Board are not allowed to charge you interest or penalties while you are in a Chapter 13 bankruptcy. As your Chapter 13 attorney, I can help craft a plan that will pay off your tax obligations owed to the government. This way, you will emerge debt free after your Chapter 13 bankruptcy is over.

Don’t Delay

If you know you have a large tax burden, it makes sense to contact a qualified Chapter 13 bankruptcy attorney as soon as possible. Interest and penalties will only continue to grow your tax debts. Stop the bleeding and get onto a path towards financial recovery before things get too out of hand.

I help people in Northern California reorganize their debts, including IRS tax debts, through Chapter 13 bankruptcy. Please call my office at (916) 333-2222 for more information.

Attorney Rick Morin