How are Taxes Handled When You File Bankruptcy?
One of the biggest financial problems a person can find themselves in is to owe a great amount of debt. Creditors come after the individual because they want to be paid back, but if it is impossible to pay back the amount, there can be great stress on the person. As a last resort, the individual might want to file bankruptcy. If you find yourself in such a situation and feel the need to file bankruptcy in North Carolina, our Concord bankruptcy attorneys can help.
However, there may be an additional question as to what happens to taxes when you file?
The best thing to do when you owe your creditors and the Internal Revenue Service (IRS) simultaneously is to find a local bankruptcy law firm that can help you with your situation. Be sure to carefully select the right Concord NC bankruptcy attorneys, like the lawyers at Ferguson, Hayes, Hawkins & Demay, so that you can be assured of having reputable professionals on your side. After all, owing money, especially to the IRS, can be a highly stressful situation and one that should be taken seriously.
Generally speaking, taxes can be reduced or even eliminated when you file for bankruptcy. Your local bankruptcy law firm can assist you in your Chapter 7 case in a few ways. There is what is known as the Three Year Rule, which states that any tax that is owed from your obligation to pay taxes at least three years before filing your case can be eliminated. There is also the Two Year Rule, which means that if you filed tax returns two years before bankruptcy filing, your tax debt can be eliminated. The 240 Day Rule allows the owed taxes to be eliminated when the IRS performs an assessment of your taxes at least 240 days prior to your bankruptcy case being filed.
If you are found to be guilty of fraud or tax evasion, your taxes will not be reduced or eliminated.
Taxes may be reduced when filing for Chapter 13 bankruptcy as well. After filing your case, a trustee will be assigned to it and this individual will collect a smaller monthly amount toward your taxes that is devised through what is known as a Chapter 13 Plan. The duration of the payment through this plan can last anywhere from 36 to 60 months.
Get in touch with our local Concord law firm today with any questions about bankruptcy or debt relief. We can help!