Friday, June 6, 2008

Bankruptcy & Taxation

When you face bankruptcy there are some very important things you need to think about when it comes to taxation. If you plan on filing for bankruptcy, you will want to make sure that you have done as much as you can to save yourself as much trouble, money, and time as you can.

You should know that any income tax debts might be eligible for being taken care of under Chapter 7 or chapter 13. If you are willing to file for bankruptcy, this is one of five ways that you can get out of tax debt. However, you should remember that in order to get your taxes discharged by filing for bankruptcy, you are going to have to meet certain requirements, so you should make sure you meet them before you file for bankruptcy to get out of tax debt.

If you file for Chapter 7, you are going to be able to get fully discharged of the debts that are allowable. With Chapter 13, there will be a payment plan that is required so that you can pay back some of your debts, and the rest will be discharged. Remember that not all of the tax debt that you might have is going to be discharged if you file for bankruptcy. You have to meet five criteria in order to get your taxes taken care of.

These five criteria that you need to meet in order to get your tax debt discharged when you file for bankruptcy are all important:
  • The first is that the date that the tax return was due was at least three years ago.

  • The second is that the tax return had been filed at least two years ago.

  • The third is that the tax assessment is at least 240 days old.

  • The fourth is that the tax return cannot have been fraudulent.

  • And finally that you must never have been condemned guilty of tax evasion.
If you can meet all the above five criteria, you are going to be able to most likely get your tax debt discharged when you file for bankruptcy.

Remember that filing for bankruptcy carries its own consequences, especially on your credit. You should not file for bankruptcy just to be able to get out of paying your tax debt, because it is going to do much more harm than good in the long run when it comes to the damage done to your credit. Only file if you have no other option and if you’ve been told by a professional economic advisor that it is your best chance of beginning to rebuild your life.

No comments: