While it’s true that Chapter 7 debt relief bankruptcy – besides being more difficult than ever to qualify for following Congressional revisions of the federal bankruptcy code eight years ago – generally ignores the debts arising from unpaid income taxes, the rule’s far from absolute, as the following guide should hopefully illustrate. Yes, although the Chapter 7 bankruptcy protection has largely been invoked by American consumers worried about their credit card debt accounts, medical bills, or similar unsecured private burdens, there remains some instance in which bankruptcy could workably eliminate the most crippling Internal Revenue Service debts and provide some form of tax relief for citizens nearing complete household financial collapse.
As you should well imagine, the stringent eligibility requirements guiding such protections are extremely difficult for all but the least solvent to demonstrably meet, and ordinary consumers who suddenly realize the extent of their taxable liabilities should be wary about overly trusting the auspices of bankruptcy protection to safeguard their assets or wages if in danger of defaulting upon their debts to the governmental revenue stream. Nevertheless, as thousands of debtors somehow manage each April to successfully convince the IRS that they do deserve the full shield in this regard, a momentary investigation into the likelihood or applicability of the tax relief solution must be worth some consideration.
Both the Chapter 7 and Chapter 13 forms of tax relief could potentially be in play, given that certain well defined regulations are met. However, as with the traditional variant of credit card debt relief bankruptcy protection, the Chapter 7 model continues to be the most sought after alternative by some degree as that form of bankruptcy would fully (and forever, upon discharge of the bankruptcy declaration) eliminate all relevant debts while the Chapter 13 approach instead initiates a repayment plan drawn up by the court mandated trustee. Either chapter would be appropriate measures of tax debt relief provided the debtor in question would be approvingly judged based upon the following five points of contention:
- You have not previously been found guilty of state or federal tax evasion by some division of the American legal system
- The taxes in question were for a period ending more than thirty six months prior to the date of filing for bankruptcy
- You properly submitted a tax return more than twenty four months prior to the date of filing for bankruptcy
- You were levied an amount of taxes at least two hundred and forty days prior to the date of filing for bankruptcy
- Your original tax return was deemed thoroughly accurate by government auditors
If, indeed, you have soberly scrutinized your financial accounts and believe that you would fit each one of the aforementioned criteria – and, as well, we would hope, you have already consulted a Certified Professional Accountant well schooled in matters of IRS doctrine who has agreed that you may qualify for tax relief under Chapter 7 or Chapter 13 bankruptcy protection – then you may well wish to spend (the not inconsiderable) sums necessary to meet with an attorney specializing in bankruptcy declaration to discuss the next step. As we have said, the Internal Revenue Service has taken pointed steps to render tax relief through Chapter 7 or Chapter 13 bankruptcy as onerous as possible, but even they recognize that full compensation of the debts owed the government will not always be within the power of every individual.
