For many, taxes are one of the single biggest financial obligations that we face on a weekly, monthly and yearly basis. Deductions for taxes are withheld from our paychecks, and every spring we are required to file returns to determine what our total obligation is for the year. Even with this process of withholding, many people still find themselves owing in additional funds when spring rolls around and the yearly return is filed. If you find yourself in this situation, you may be wondering: “What Happens Next”?
Typically, the IRS or the Department of Revenue will send a letter demanding payment, and will persist in these demands as long as the taxes remain unpaid. They may also assess fees, interest and penalties as they do so, demanding larger and larger sums to satisfy the amount owed. For many of us, the amount demanded by the taxing authority may not be something that we are in a position to pay immediately, especially for anyone who is already dealing with unmanageable debts. This may lead to another question: “What can I do to take care of my tax balance?”
The good news is this: bankruptcy is here as a resource to help. Firstly, bankruptcy grants us relief from the collections process as the automatic stay prevents the IRS or the Department of Revenue from garnishing or directly billing for income taxes that are owed pre-filing while your bankruptcy is active and ongoing. Perhaps more importantly though, bankruptcy can also offer the opportunity to resolve the actual balance owed for these taxes as well, either through repayment, or in some circumstance, by eliminating them entirely through the process of the bankruptcy discharge.
A number of different factors are considered when determining whether a tax debt is dischargeable, including the type of taxes owed, the age of the tax debt and how long ago the actual tax returns in question were filed. In speaking with your attorney, they will advise you on the standard used by the court to make this decision, and will help you navigate the process of determining which chapter of bankruptcy may be the most productive for you based on this. However, regardless of whether or not an income tax debt is dischargeable, there are still additional resources that bankruptcy can offer to help you resolve it.
One of the primary ways that this can be accomplished is through a Chapter 13 bankruptcy filing, wherein certain taxes can be repaid through the bankruptcy plan, typically without any ongoing interest or penalties. As with all Chapter 13 plans, this plan will be tailored to address your specific financial circumstances, and will be structured to incorporate your individual needs. In speaking with your attorney, they will advise you on what the best path will be to help you resolve any back balance that may be owed using the resources of the bankruptcy process.
Receiving a notice from the IRS or the Department of Revenue can sometimes be a little bit scary, and can leave us wondering what options are available to resolve the situation. However, this is not a challenge that you need to go through along. The bankruptcy process is here to be a resource to you, and our firm are experts at navigating it.
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When the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to www.lifebacklaw.com.
