Can Bankruptcy Remove Tax Debts?

Tax returns are very vital payments that the US citizens are deemed to pay annually. You must keep on paying that tax regularly. Defaulting on this can engender you to dire consequences of huge debt muddles. At this juncture, you might often feel helpless and stressed out and fail to to act rationally to remove your debts. If you are confronting such a situation, instead of being perplexed, you must be patient and look out for all the possible avenues for recovery. One of the effective option is to file bankruptcy which can help you to release your debts.

However before you attempt to file for bankruptcy, you must have a detail knowledge regarding the types of bankruptcy.

Filing Bankruptcy to clear tax debts

Chapter 7 Bankruptcy

The chapter 7 Bankruptcy refers to “liquidation”, which means the court seizes the nonexempt property of the debtor to recover the debt amount and pay off to the creditors. Taxes are considered as priority debts which is generally non-dischargeable in case of bankruptcy. However, if you owe the tax debts for more than three to four years, and you have already filed a tax return for it, you can discharge the debts like an unsecured debt. To be eligible for the chapter 7 bankruptcy, your income level should be below the median income of the state in the given tax year.

Chapter 13 Bankruptcy

In case you are ineligible for the chapter 7 bankruptcy, you have another alternative of chapter 13 bankruptcy. This will halp you to eadicate your unsecured debts within five years. While you are making payments to remove your debts, the IRS may not attempt to embellish your earnings for collecting heir money. The chapter 13 bankruptcy is a wise option if you wish to pay of debts taking up a repayment plan.

Sometimes the debtors opt for debt settlements to avoid the hassles of bankruptcy. In rder to do this, you must visit a bankruptcy lawyer to know the pros and cons of both filing bankruptcy and settling your debts, before you actually file for bankruptcy. However, if you have not paid your income tax returns properly and has been traced for thet, then debts on these returns could not be paid in bankruptcy.