Tax debt article written by Columbia lawyer Daniel Stone
Bankruptcy can be very beneficial to debtors seeking tax relief. Depending on the type of tax debt and age of the debt, bankruptcy can be very helpful. The most significant gains can be seen with federal and state income taxes older than three-years-old. If the income tax is older than three years and meets other requirements such as the tax returns being filed, the taxes can be discharged in bankruptcy. If you think you are maybe a candidate to have your taxes discharged, please set an appointment with me to discuss the additional factors.
Bankruptcy can also stop wages from being garnished by the IRS. In many instances, a Chapter 13 plan can payback priority taxes at a lower monthly payment than the IRS wage garnishment. Finally, in many cases debtors can value tax liens in a Chapter 13 down to the equity in their real and personal property. To give you an example, if you have a $80,000 tax lien from taxes older than three years and meet other requirements, you can value the tax lien down to the equity if you have in your home and personal assets. In this scenario if you had $5,000 equity in your home and $3,000 equity in personals assets, you could value the $80,000 tax lien to $8,000.