A federal tax debt can raise a wide range of problems for a person. So, one thing some might wonder is: What kind of relief can bankruptcy provide individuals regarding tax debt? What help a person could get from bankruptcy when it comes to tax debt can be impacted by many factors.
One is the type of tax debt they have. A discharge of federal tax debt can be available in a bankruptcy. However, not all types of tax debt are eligible for discharge. Rather, such a debt has to meet certain requirements to qualify. We go over these requirements on our tax debt page.
Another thing that can have impacts on what happens with a person’s tax debt in a bankruptcy is the type of bankruptcy a person files for. Chapter 7 can provide a relatively straightforward route to discharge (provided a person’s debt is dischargeable). Meanwhile, Chapter 13 can provide a person a route to handle their tax debt through a payment plan. Various things can affect what type of bankruptcy a person could file for and which bankruptcy type would best fit their overall situation.
Another thing that can impact what degree of tax debt relief a person could end up getting through a bankruptcy is how they act during the bankruptcy process. This process involves many complex steps. Making mistakes during such steps could compromise a person’s overall goals related to the bankruptcy. This includes their goals related to tax debt they have incurred.
So, when looking into or pursuing a bankruptcy in relation to tax debt, it can be of considerable importance to have guidance from an attorney experienced in bankruptcy matters.