Tax solutions
Chapter 7 Bankruptcy
This is the most common type of bankruptcy, and the type most people think of when they refer to "filing bankruptcy." With chapter 7, the debtor generally loses all his assets (with the exception of certain "exempt" assets) and wipes out (discharges) all his debts (with the exception of certain "non-dischargeable" debts).
The extent to which assets that can be claimed "exempt" from the claims of creditors depends on the state in which the debtor resides. Each state can either elect to follow the federal exemption statutes, or have its own set of exemptions. In Florida, the exempt assets generally include $1,000.00 worth of your personal property, $1,000.00 equity in a motor vehicle, a $4,000.00 “wildcard” if you do not live in your homestead the day you file bankruptcy, the cash surrender value of life insurance policies, annuities, certain wages, one's homestead, and various other things. However, these items are not exempt from the claims of the Internal Revenue Service!
Non-dischargeable debts include alimony and child support obligations, student loans, debts incurred by fraudulent means, and certain tax debts. Chapter 7 cannot discharge (i) an individual's debts for "newer" income taxes, or (ii) civil penalties relating to payroll tax (regardless of age). Once income taxes age enough, they change from non-dischargeable to dischargeable. Therefore, it is imperative that before anyone actually files for bankruptcy protection, they consider the timing of their bankruptcy! Many times taxpayers do not wait long enough before filing such that, afterward, they may no longer owe medical bills or money to credit card companies, but they still owe large debts to IRS.
To find out if your income tax debts are old enough to be discharged, contact us for a Strategic Session meeting. The way we approach tax bankruptcies is to realize discharging income tax debts is an important, difficult but possible three-step process. The first step is to research the facts of your particular case to make sure the taxes are dischargeable. If they are, then your bankruptcy attorney can go to the second part and file bankruptcy. If not, we determine when they would be and wait until then. The second stage is the actual bankruptcy. Afterward, we do the third and final stage, which is to deal with IRS to show them why your tax debts were discharged and obtain a written release of your tax debts.
Afterward, you will find yourself free not only of credit card debt, medical bills, and judgments, but free of IRS as well!
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