Sometimes Tax Debt in Oklahoma Bankruptcy is a persons number one reason for filing. It’s quite common to hear TV and radio ads offering the ability to eliminate tax debt during a bankruptcy filing. However, the process isn’t as easy as these advertisers claim it to be. The majority of tax debts cannot be eliminated in bankruptcy; you will still owe them after a Chapter 7 case, or you’ll have to fully repay them through a Chapter 13 repayment plan. If you’re suffering from back taxes, a Chapter 7 filing will likely be the best option, but only if the debt qualifies for discharge. Read on to learn more about forgiving taxes in bankruptcy.
When Tax Debt in Oklahoma Bankruptcy is Forgiven
It is possible to discharge or wipe out federal income tax debt during a Chapter 7 bankruptcy filing only if the following criteria are met.
- The taxes owed are related to income. Other taxes, such as fraud penalties and payroll taxes, cannot be eliminated in any type of bankruptcy filing.
- You didn’t commit willful evasion or tax fraud. If you submitted a false tax return or you otherwise intentionally tried to avoid paying taxes, such as using a fake Social Security number, bankruptcy will be of no help.
- The debt is three years old or older. To discharge tax debt, the return must have been filed three years or more before the bankruptcy filing date.
- You submitted a return. To discharge a debt, you must file a tax return for it (two years ahead of the bankruptcy filing). In most jurisdictions, if your return is filed late and the IRS submitted a substitute return for you, it doesn’t count and the debt cannot be discharged. In other areas, however, it’s possible to discharge a tax debt on a late return if the other criteria are met.
- You’ve passed the 240-day waiting period. The debt to be discharged must have been levied by the Internal Revenue Service 240 days or more before the bankruptcy petition is filed. The time limit might be extended if collection activities were suspended because of a prior bankruptcy filing or an offer in compromise.
Bankruptcy rules and tax laws are complicated, and most taxpayers can’t navigate the process alone. If you’re dealing with bankruptcy and tax debt, consider consulting a local attorney to learn what bankruptcy you qualify for.
Federal Tax Liens Can’t Be Discharged
If the taxes in question qualify for a Chapter 7 bankruptcy discharge, the victory may be a bit diluted. Unfortunately, a bankruptcy will not eliminate past tax liens that have been recorded. Though a Chapter 7 filing will eliminate the personal requirement to repay the debt (and keep the IRS from garnishing your wages or bank account), the lien will stay on the asset. In the simplest terms, you will have to pay the tax lien before selling the property.
Bankruptcy Help in Oklahoma
When filing for Chapter 7 or Chapter 13 bankruptcy, the elimination of tax debt Tax Debt in Oklahoma Bankruptcy may be a primary concern. Though it’s possible to discharge some of these tax debts, others may remain in the end. With help from a bankruptcy attorney, you’ll discharge as much debt as possible and receive the fresh start you deserve.