When you are in debt, it can be overwhelming. However, you may find that declaring bankruptcy can help you reclaim your finances. One thing you may be excited to say goodbye to is the tax debt you’ve incurred over the years. It’s important to understand that while filing bankruptcy can relieve some debts, it does not clear all obligations. As such, understanding whether or not your tax debts are dischargeable during the bankruptcy process is critical. If this reflects your circumstances, keep reading to learn how a Memphis, TN tax debt lawyer can assist you during this challenging time.
What Is a Dischargeable Debt?
When declaring bankruptcy, it’s necessary to understand what a dischargeable debt is. Essentially, this means that bankruptcy can eliminate the debt. On the other hand, not all debt can be forgiven, and remains the responsibility of the filer to repay even after they have completed the process. This is known as a non-dischargeable debt.
Is Tax Debt Dischargeable?
In general, most tax debt is non-dischargeable during the bankruptcy process. Typically, the only taxes that can be forgiven during this process are federal income taxes. However, to do so, you must meet strict criteria. For example, if you wish to pay off these debts, the taxes must be at least three years old, you must have passed the 240-day rule, did not commit fraud, and have filed a tax return.
You should also know that even if you meet all the requirements to have this debt discharged if there is a lien on your property, you’ll still be responsible for paying off the lien. Similarly, if you paid your taxes with a credit card, your card company may challenge the dischargeablity of filing Chapter 7 bankruptcy.
What Should I Do if My Dbet is Non-Dischargable?
It can be discouraging to learn that some of your debt is non-dischargeable. However, this shouldn’t deter you from filing if you still have other outstanding charges. This is because erasing eligible debts can help free up your finances to put toward non-dischargeable debts, making it significantly easier to manage these payments.
In the event you have tax debts, connecting with an experienced attorney to explore your legal options is critical. Not only can they help guide you through the process of filing for bankruptcy, but they can also help you know when to file your taxes if looking to discharge certain debts.
When you’re in debt and looking for a fresh start, the Arnold Law Firm can help. We understand how complex these matters can be, which is why we are dedicated to helping you through these complex times. This process can be overwhelming even if you’re somewhat familiar with the process, so letting our team determine the best course of action for your needs can give you peace of mind that your case is in good hands. Reach out to our firm today to learn more.
