Dealing With IRS Tax Debts Using Bankruptcy

If you are burdened with unpaid federal or state taxes, it is important to learn about your options for dealing with the situation. If your debt is significant, bankruptcy may provide you with relief so you can move forward in life. Discharging taxes in bankruptcy is a very complex issue, however. Make sure you enlist the help of an experienced, trusted attorney who can help you understand the situation.

At Linda Bal & Associates, we handle bankruptcy for clients in Chicago, Naperville and throughout the surrounding areas. We know how difficult and frightening it can be to deal with creditors, especially if one of them is the IRS. With more than 25 years of experience, we understand how tax law and bankruptcy law interact. We can assess your situation and advise you of your options.

Discharging Tax Debts In Bankruptcy

When you file for bankruptcy the court enters an automatic stay, which forces creditors to stop trying to collect payment from you. The IRS and the Illinois Department of Revenue must honor the stay, just like any other creditor. The way your tax debt is treated will depend on the type of bankruptcy filed and the age of the debt.

  • Tax debts more than three years old: If your tax debt is more than three years old, you may be able to file Chapter 7 bankruptcy and have the debt completely eliminated. Your income and assets must be at levels low enough that you qualify for Chapter 7.
  • Tax debts less than three years old: For tax debts that are more recent, Chapter 13 bankruptcy may be an option. Chapter 13 sets you up with a payment plan that includes all your debts. You make monthly payments for three to five years, during which the IRS cannot assess any penalties or garnish your wages.

Bankruptcy can provide relief from income taxes, but not payroll or excise taxes. When you visit our law office, we can analyze your unique circumstances. If you have significant medical bills or credit card debt in addition to your tax burden, we are ready to help you deal with those debts as well.

A Caveat

If you have tax liens on your property, you cannot expect a bankruptcy filing to discharge these liens. Our skilled lawyers will look closely at the specifics of your situation and will help you determine whether bankruptcy is the proper course of action to relieve your IRS problems.

Serious Tax Debt Issues Call For Serious Legal Representation

Federal bankruptcy protections are “on the books” to help hard-working people who have fallen on hard times through no fault of their own. To learn more about the bankruptcy process and how it may help you with existing tax debts, please call Linda Bal & Associates at 630-912-5970. You can also contact our law firm online. Your initial consultation is free.