Does Bankruptcy Eliminate All of My Debts?
Filing for bankruptcy won’t necessarily make all of your debts instantly go away. The old saying that nothing in life is certain except “death and taxes” has some truth to it. While Chapter 7 bankruptcy can eliminate credit card and other unsecured debts, it won’t get rid of most tax debts you may owe. However, you may be able to get rid of federal income tax debt (not payroll tax debt or fraud penalties) through Chapter 7 bankruptcy IF all the following conditions are met:
- You did not willfully try to evade paying taxes by filing a fraudulent tax return;
- The tax debt is at least three years old at the time you file for bankruptcy;
- You filed a valid tax return for the debt you want to get rid of at least two years before you file for bankruptcy;
- The income tax debt was assessed by the Internal Revenue Service (IRS) at least 240 days before you file for bankruptcy, or has yet to be assessed.
It’s also worth pointing out that tax debt cannot be fully forgiven if the IRS has already put a federal tax lien on your property. If this is the case, the debt CAN be negotiated and settled as to the dollar amount of assets listed in the debtor’s schedules (if the debtor can satisfy all four of the aforementioned conditions). Fortunately, in cases where the IRS debt doesn’t qualify to be discharged, the debtor can file for Chapter 13 bankruptcy and immediately stop all interest and penalties and agree to pay the non-dischargeable IRS debt via a payment plan lasting between 36-60 months.
Other debts that cannot be forgiven may include child support, alimony, student loans, mortgage and property liens, recent credit card debt (charges made right before you file for bankruptcy), car loans (if you intend to keep the car), debts owed to a former spouse, court fines and criminal restitution, and personal injury debts from driving while intoxicated.
To find out whether or not filing for bankruptcy is the right fit for your situation, don’t hesitate to contact the experienced San Fernando Valley bankruptcy attorneys at the San Fernando Valley of Nader, Naraghi & Woodcock, APLC. If you’re dealing with tax debt, and don’t know where to turn, our law firm can help. Over the past two decades, we’ve eliminated over $3 million of IRS liability on behalf of our clients. To learn more, please call (800) 568-0707 for a free consultation.