One of the greatest displays of strengths in a human is the ability to ask for help. This is no less true when managing your personal debt. Bankruptcy is a way for you to ask for help in getting your debt under control. While medical bills and job loss are two common reasons people file for bankruptcy, back taxes are another reason you may wish to file for bankruptcy.
This is because you may be able to have your past-due taxes erased, or discharged, in a Chapter 13 bankruptcy. Filing for Chapter 13 bankruptcy allows you to reorganize your debt into more palatable payments and stop harassment from your creditors.
How bankruptcy helps with your tax debt
For a court to discharge your back taxes, you will need to file all your tax returns from the last four years and continue to file any subsequent returns as well. If you have trouble meeting the filing deadline, it’s critical that you obtain an extension, or the court could throw out your case. A court may also dismiss your case if you fail to pay current taxes during your bankruptcy, too.
Alternatively, the IRS offers payment plans for repayment of past-due taxes. Another option the IRS offers is “an offer in compromise” that may allow you to pay a portion of your tax debt if your eligible and can show that full repayment would create a financial hardship. However, you cannot pursue the offer in compromise option with an open bankruptcy.
Why struggle if you don’t have to?
What’s nice about the bankruptcy option is that it allows you to reorganize your eligible debts like medical bills and back taxes. If you’re seeking a discharge of your overdue taxes, you’re going to have to have all your recent tax returns filed and stay current on any subsequent taxes. With Chapter 13 bankruptcy, you don’t have to try to manage your tax debt alone.