How Bankruptcy Impacts Your Taxes

July 26, 2013 Posted by kingcade

Bankruptcy has been a part of our country’s history and constitution for years. Originally, bankruptcy was only available to businesses, credit was not readily available to the working class. By the end of World War II, the face of bankruptcy changed as credit became available to U.S. citizens. In 2005, the bankruptcy laws were tightened, but they can still provide relief for debt- including your tax debt.

Here are some simple rules to remember:

• If you are currently under audit, bankruptcy will not stop the audit. It will stop collection action while the bankruptcy is pending and if there is no Relief of Stay motion from the IRS.

• Not all tax debt can be discharged in bankruptcy. Items considered ‘priority debt’ cannot be discharged. This can include child support, student loans and drunk driving charges. These types of debt must be completely repaid in Chapter 13 reorganization.

For taxes to be dischargeable in bankruptcy, they must be personal income taxes which are at least three years old. Also, the tax must be assessed for at least 240 days. But if you have not filed your tax returns, it does not matter how old the liability is, those taxes will not be dischargeable in bankruptcy. Every situation is different, so it’s best to involve an attorney when dealing with tax debt and bankruptcy.

Click here to read more on how filing for bankruptcy can impact your tax debt.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

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