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Articles Posted in Bankruptcy

If your debts have gotten out of control, then you’re more than likely considering filing for bankruptcy. So, what are the best actionable next steps to take? There are three main types of bankruptcy that you may qualify for, all of which can help you either get out of debt entirely or make your debts more manageable. While that easily works for common debts like those created by credit cards and other purchases, will it work for tax debt? What if you owe the IRS a lot of money? While some tax debts may be dischargeable through a bankruptcy, most are not, leaving you with a large bill owed to the IRS.

Debt Collection

When you owe money to the IRS, they will do everything that they can to collect that debt. If you ignore the debt long enough or owe a large sum of money, the IRS will file a tax lien on your property. But first, you’ll receive a number of notices which allow you time to reach out to them in order to set up a payment plan or file for bankruptcy before they will actually seize your property and sell it at auction in order to recoup the money. However, this will happen if the debt is ignored long enough. The IRS wants you to pay what you owe and will go to great lengths, if necessary, in order to collect the money that you owe them.

Bankruptcy allows individuals and businesses in financial distress to obtain relief from their debts. “Financial distress,” in this context, typically refers to situations in which one’s income is not enough to continue making required debt payments. The “relief” offered by bankruptcy may involve a discharge of debt after a period of making payments or liquidating assets. Not all debts, however, are eligible for discharge. Discharge of tax debt in bankruptcy is particularly tricky. It depends on the type of taxes owed, and the circumstances in which the debtor accrued the tax debt.

A bankruptcy case is often a difficult process for debtors. This is largely by design. Federal bankruptcy law requires debtors seeking relief to undergo an extensive process of accounting for all of their assets and debts. A court-appointed trustee oversees the debtor’s property, known as the “bankruptcy estate” while the case is pending. The trustee notifies the creditors and holds a meeting to allow them to present their claims. The debtor has to abide by payment schedules created by the trustee.

Three chapters of the Bankruptcy Code form the most common types of bankruptcy cases. Chapter 7 allows for discharge of debts after liquidation of assets. Chapter 11 involves a restructuring of debts and debt payments. Chapter 13 establishes a plan for payment of debts, followed by a discharge of remaining debts. Individuals and families usually file for bankruptcy under either Chapter 7 or 13. Businesses can file under Chapter 7 or 11, but they can only obtain a discharge of debts under Chapter 11.
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