Chicago Bankruptcy – Stopping a Tax Levy.

Posted April 11th, 2011 in Blog and tagged , , , , , by admin

When you file your Chapter 7 or Chapter 13 Bankruptcy, your Automatic Stay can stop a taxing authority like the IRS or your state department of revenue from levying your bank account.  Your Chicago Bankruptcy Lawyer will be able to determine whether you need to file a Chapter 13 or a Chapter 7 to handle your tax situation in the best manner.

Tax treatment in a Bankruptcy can be complicated because it requires a detailed analysis regarding the age of your taxes, when the appropriate tax returns were filed, and whether you have made payments against the debts.  The answers to these questions can help your attorney figure out whether a Chapter 7 or a Chapter 13 would fit your situation the best when dealing with your potential tax levy.

Generally, most people believe that taxes are not dischargeable in a Bankruptcy.  This, however, is not entirely true.  First of all, taxes can become dischargeable if the debt is older than 3 years.  This 3-year measurement requires that we look back to when the tax return was actually due.  A good Bankruptcy Attorney will recognize that although April 15 is the tax deadline every year, sometimes that day falls on a weekend or holiday.  This can result in a different actual date for the deadline.  For instance, if the 15 th is a Friday, but happens to be a federal holiday, then the deadline is pushed until the following Monday, the 18 th .  This is a trap for some debtors.  If you owe taxes from 3 years ago, but file your bankruptcy on April 16 th under the above scenario, your tax debt would not be eligible for a discharge.  By understanding when the previous tax-filing deadline actually was, an experienced Bankruptcy Attorney will advise you to wait until the 19 th to file your Bankruptcy in order to optimize your discharge.  It would be extremely frustrating to file your Bankruptcy will the express purpose of discharging tax debts, only to find out that you filed a mere 2 days too early to receive the benefit you sought.

One Response so far.

  1. says:

    I did not know that bankruptcy could save me from IRS too.Thanks for sharing your insights always with everyone through your blog site.Keep posting such interesting posts always.