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When a person files for bankruptcy, they’re attempting to reset their financial stability. While bankruptcy can help a person clear unsecured debt that they can no longer pay, many wonder how they should handle their tax debt. Handling IRS debt correctly is important because of the powers that the agency can use to collect it from debtors. For example, the IRS can file tax liens and levies that can affect your job, wages, bank account, and property. This makes receiving the help of a qualified Massachusetts IRS debt attorney crucial.
Keep reading to learn more about IRS debts and bankruptcy. Or, call our Massachusetts tax debt lawyers right now at (508) 502-7002 for a free initial consultation.
Does Bankruptcy Include Tax Debt?
When a person files for bankruptcy, whether Chapter 7 or Chapter 13, their tax debts can be discharged during the process. As with every type of debt, how your IRS debts are handled depends on what type of bankruptcy you’ve filed for.
Chapter 13 Bankruptcy & IRS Debts
When a person has debts, they can’t pay but a court believes that restructuring that debt will enable them to do so, they’ll typically need to file for Chapter 13 bankruptcy. During the process, a court will mandate a payment plan designed to be manageable for the person struggling to pay off their debt. This means that a person’s IRS debts will be included in their payment plan.
Chapter 7 Bankruptcy & IRS Debts
Chapter 7 bankruptcy is a process used when a person can’t afford paying off a restructured debt plan. During this type of bankruptcy, a person liquidates their assets and negotiates with creditors to settle debts. If a person has tax debt, it can be part of their Chapter 7 bankruptcy is if meets specific requirements. A person’s Chapter 7 bankruptcy tax debts will still include fees and interest.
Tax debt is included during Chapter 7 bankruptcy if:
- A person has filed a tax return in the last two years
- The debtor didn’t commit a tax crime like fraud or tax evasion
- The tax debt is three years old or more
- The debt is for income tax
- The IRS has evaluated the tax 240 days or more before the bankruptcy filing
Our MA Tax Debt Lawyers Are Ready to Help Now at (508) 502-7002
At Miller Law Group, P.C., we’re focused on helping clients throughout the state reach the financial recovery that they deserve. We’re always focused on those we’re working with because we purposely take a limited case load. Additionally, since we focus on bankruptcy law, you can be certain that your attorney has the knowledge required to help you make the right decisions. Importantly, our team meets each week to discuss cases they’re working on so our clients receive the benefit of the perspective of multiple experienced lawyers.
Your financial freedom is possible, and our Massachusetts tax debt lawyers are ready to help you at (508) 502-7002.
IRS Debt FAQ
Can IRS Debt Be Included During Bankruptcy?
Yes. However, it depends on what type of bankruptcy a person is going through. During Chapter 13 bankruptcy, a person will be able to arrange a payment for their tax debts. During Chapter 7 bankruptcy, a person will be able to discharge their tax debts if they meet specific requirements.
What Can the IRS Do to Collect Tax Debts?
The IRS has broad powers and actions they can take secure the debts a person owes. These include wage garnishments, tax liens, and other things that can affect a person’s banking, job, and property.
Should I Hire an Attorney for IRS Debt Assistance?
Yes. Turning to an attorney means having a knowledgeable professional in your corner. An IRS debt lawyer will help you understand your options and find the most logical solutions to your tax debt problems. They’ll also work to help you avoid further fees, meet deadlines, and more.
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