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Considering back taxes and bankruptcy as a debt relief option

On Behalf of | Jun 25, 2020 | Tax Controversies

Massachusetts residents probably do not like owing money to anyone, but unfortunately, it seems to be a fact of life, especially during the current circumstances. If you find yourself in this predicament, you may owe back taxes along with other debt you cannot pay, and you may have questions about taxes and bankruptcy and wonder if it could help in your situation. The problem is that you heard that taxes cannot be discharged through bankruptcy, but is that always the case?

Actually, the simple answer to that question is that bankruptcy could help you with your back taxes under the right circumstances. If your situation meets certain criteria, filing under Chapter 7 could reduce or even eliminate the amounts you owe the IRS. You may also get to keep your property in the process.

If you file under Chapter 13, you will most likely still be required to pay the amounts you owe, but you do receive at least some relief. Penalties and interest may be suspended during the repayment period. This could save you a substantial amount of money since all you will be responsible for is the principal amount you owe. If your case is handled properly under either chapter, you could walk away free from your tax debt.

The problem is that taking advantage of this debt relief option is not as easy as many Massachusetts residents believe. You will need to adhere to certain deadlines, produce the appropriate documentation and fill out all the paperwork correctly, and this is for the easy debts, such as credit cards, medical bills and more. You will probably encounter additional requirements and roadblocks related to your tax debt, and you may fare better with the advice and assistance of an attorney who routinely helps individuals like you with their taxes and bankruptcy.

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