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Bankruptcy May Be Your Option

Chapter 7 bankruptcy and tax debt

For individuals and families, the most overwhelming debt is often due to federal, state and local taxes. In many cases, chapter 7 bankruptcy can resolve the debt, allowing for a fresh financial start. It is also possible to deal with the debt under chapter 13 bankruptcy, but like any other debt, it is simply restructured, not eliminated.

There are specific requirements that must be met in order to discharge tax debts. If every one of these criteria are not met, your tax debt cannot be discharged. For starters, only income taxes can be forgiven. In addition, the debtor must have also filed a return in the two years prior to filing for bankruptcy.

If the debtor has committed any kind of willful tax evasion, you are ineligible for debt discharge. This also applies to tax fraud. Any attempt to defraud or avoid paying the IRS can land you in hot water, including being stuck with whatever tax debt you have accumulated.

There are also time stipulations associated with discharging your tax debt, which can be a little confusing. First, the debt must be at least three years old in order for it to be eliminated. Finally, your taxes must have been assessed at least 240 days before filing for bankruptcy. If all of these qualifications are met, you may be eligible for discharging your tax debt.

Even if the debt is discharged, the federal government may have placed a lien on your property before the bankruptcy was complete. You are still responsible for this lien. While you may choose to ignore it, selling the home may be especially difficult if the lien is not paid off.

If you are facing an overwhelming debt from taxes in Oklahoma, it may be wise to consult an experienced bankruptcy attorney in order to explore your options.

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