Eldridge Financial Review: Can filing bankruptcy help you discharge your IRS debt?

Filing bankruptcy does not discharge your debts like student loan alimony, child support and so on. Your IRS tax debt might not discharge even after filing bankruptcy. If you have an option to get relief from tax obligation then avoid filing bankruptcy. You can successful discharge your IRS tax debt if you meet certain requirements. You can read further to know the eligibility requirement to file bankruptcy in order to discharge debt.

Know the chapter under which you can file:

When you plan to discharge your IRS tax debts through bankruptcy then you are required to qualify under chapter 7 Bankruptcy in order to clear your debts. In case you are unable to qualify for chapter 7 bankruptcy then file under chapter 13 to eliminate your financial woes. You are required to undergo strict eligibility criteria despite you qualify for chapter 7 bankruptcy.

What are the requirements of the filing procedure?

Before you file under chapter 7 bankruptcy the IRS requires you to fulfill five requirements.

1. You are eligible to file bankruptcy if your IRS debt is a result of an underpayment of personal income taxes. Remember that other debts like delinquent payroll taxes, estate, gift, sales or fuel taxes, penalties or a federal tax lien will not be discharged under chapter 7 bankruptcy.

2. If you avoid paying IRS taxes by providing a false Social Security number then you might not qualify filing under chapter 7 bankruptcy to discharge your IRS tax debt.

3. In case your debts are not more than 3 years old then you might not qualify for discharging your IRS debt through chapter 7 bankruptcy.

4. If you have incurred debt on your tax return then remember that the debt must be a minimum of 2 years old.

5. Make sure that you maintain a gap of 240 days between the day the IRS first issued a bill for the debt and the day you file for bankruptcy.

What are the alternative options you have?

If you are unable to file your IRS under chapter 7 bankruptcy then you can propose for Offer in Compromise. Remember that this option will not discharge your debts but if your offer is approved by the IRS then it will help to lower the amount you owe. You can pay off the owed amount through a lump sum payment. If you are unable to make a lump sum payment then a 24 monthly installment payment plan can be beneficial for you. You can also opt for a deferred periodic payment plan by extending the repayment plan from the date IRS approves your application till the statute of limitations for collection ends.

Make sure you hire the services of a bankruptcy lawyer in order to know whether your IRS debts will be discharged through bankruptcy.
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