Boxelder Consulting works hand in hand with experienced Chapter 7, Chapter 11 and Chapter 13 bankruptcy lawyers in effort to provide our clients with a comprehensive solution.
Bankruptcy and Tax Debt
In some limited cases, bankruptcy may be a possible resolution strategy to your delinquent taxes. A filing in bankruptcy court immediately stops all assessment and collection of tax. This is called an automatic stay, and it remains in effect until the bankruptcy court lifts the stay or discharges liabilities, meaning they are eliminated or no longer legally enforceable.
This stay of collections is probably the most useful tool that our licensed professionals have encountered. Sometimes, when financial woes simply become too overwhelming for our clients to handle, the bankruptcy stay can provide valuable breathing room. However, most often we find that the allure of bankruptcy – the idea that there is a “silver bullet” to solve both private and tax debt – does not meet our clients’ expectations. Far more often than not, we see tax liability survive the bankruptcy process. Make sure to consult with the relevant licensed professionals – that specialize in both tax and bankruptcy – before putting all your eggs in this basket.
There are very specific and complex rules in regards to discharging delinquent tax debt through a bankruptcy. In order for income tax debt to be forgiven in bankruptcy court, the following conditions must be met:
The tax debt must be related to a return that was due at least three years before the taxpayer filed for bankruptcy.
The tax return must have been filed at least two years ago.
The tax assessment must be at least 240 days old.
The taxpayer cannot have been convicted of tax evasion, and the tax return cannot be determined fraudulent or frivolous.
This is a short overview of a complicated topic, and the rules mentioned here may not apply to every taxpayer. Deciding whether a tax debt can be discharged is tricky. If you are contemplating bankruptcy, we recommend that you speak with a licensed bankruptcy attorney first. Boxelder Consulting works hand in hand with experienced Chapter 7, Chapter 11 and Chapter 13 bankruptcy lawyers in an effort to provide our clients with a comprehensive solution.
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