Flint, MI Bankruptcy Lawyers Break Down Debt and Taxes
June 9, 2021
The COVID-19 pandemic had a significant financial impact in Michigan, and even as we’re starting to come out of it, many people are still struggling to manage their debt. That’s causing more individuals to search for debt relief solutions, and many are finding that filing for bankruptcy might be a viable option for them.
While it is a helpful way to regain control of your finances, navigating this complex process can seem overwhelming. The team of Flint, MI bankruptcy lawyers here at Gutting Law wants to make it easier, which is why we’re explaining how filing for bankruptcy affects the taxes owed on your debts.
How bankruptcy affects your tax obligations.
One of the more common questions our Flint, MI bankruptcy lawyers hear from clients is, “will my taxes be forgiven if I file for bankruptcy?” Unfortunately, there is no straightforward answer that applies to everyone and every type of tax.
Things like payroll taxes or fraud penalties, for example, can never be eliminated in bankruptcy. However, using Chapter 7 bankruptcy, it can be possible to have some or all of your income tax discharged. Below we’ll explain what you’d need to qualify for a discharge and what you can expect if you pursue this route.
Requirements for having taxes discharged.
As mentioned, not all taxes can be discharged, and not everyone will qualify to have theirs forgiven. If you have questions about whether or not your taxes qualify, you can reach out directly to our bankruptcy lawyers in Flint, MI, but these are the basic requirements.
The tax must be some sort of income tax. This can be from a traditional W-2 job or from 1040 taxes.
You must have at least two years of tax returns already on file with the IRS.
The tax debt must be at least three years old.
You must have a tax assessment that is no more than eight months old. If the IRS hasn’t assessed the debt within the last 240 days of your filing, the income tax isn’t dischargeable.
If you believe that your taxes meet all of these qualifications, then you might have a chance to have them discharged. If that’s the case, our team can help you through the process.
The tax debt discharge timeline.
Having your taxes discharged isn’t the simplest of procedures. There are multiple steps that you or your lawyers will have to take, but generally speaking, this is what you can expect.
The first step is filing the actual paperwork and submitting it. The debt needs to be listed as priority unsecured debt in Part 1 of Schedule E/F.
A trustee meeting is then held at the 341. This is where the trustee reviews the paperwork, confirms your identity, and asks questions about any potential red flags they find.
If you are approved for a discharge, the court has the power to relieve you of your tax obligations. At that point, you’ll receive a notification of discharge within about 60 days.
Are you struggling with your debt?
Then let the team of Flint, MI bankruptcy lawyers at Gutting Law help. James L. Gutting is an attorney-at-law who specializes in bankruptcy cases, and he has a proven track record of success. He can walk you through all of your debt relief options and help you figure out which avenue best suits your unique needs.
If you choose to partner with Gutting Law, then you can have confidence knowing you have an experienced attorney who will serve as your advocate every step of the way. Learn more about the bankruptcy process, or connect with us online to set up your initial consultation.