How Will Filing Bankruptcy Affect My Taxes?

Filing Bankruptcy Affect My TaxesOnce you decide to file for bankruptcy, there will be many areas of your finances that will be impacted. One of the most important will be taxes, since it is likely you are behind in these payments. Whether filing Chapter 7, 11, or 13 bankruptcy, most of your tax debts will not be discharged during the bankruptcy process. However, there are some exceptions. To make sure your situation is handled properly from the beginning, work closely with Mobile bankruptcy lawyers at the Loris Law Firm.

Income Taxes
When dealing with income taxes, they are the only kinds of taxes that may be discharged in Chapter 7 bankruptcy. In some limited situations, it may be possible to discharge various local, state, and federal income taxes under Chapter 7, 11, or 13 bankruptcy. But to be able to discharge federal income taxes in any situation, it must be proven by your Mobile bankruptcy lawyers that you have not willfully evaded paying taxes and that the tax debt was due at least three years prior to your bankruptcy filing.

Other Taxes
If you have various other taxes that are owed, chances are they will still be owed even after filing bankruptcy. For example, if you owe property taxes, sales taxes, employment taxes, trust fund taxes, or payments related to tax penalties that are less than three years old before you file for bankruptcy, you will still be expected to pay these taxes.

Prorated Payments
If you file Chapter 13 bankruptcy, you will still have to make your tax payments. However, this form of bankruptcy often allows individuals to work out a plan where they pay only a certain percentage of their debt, which can help relieve the tax burden.

Due to the numerous differences involved in individual cases, schedule a consultation with the Loris Law Firm to discuss your situation in greater detail.