There is a common misconception that the Bankruptcy Code only provides relief to those without valuable assets or those with low incomes. In fact, Chapter 13 of the Code provides flexible forms of relief for taxpayers with any amount of assets or income, and the only limitation is on their debts.
Unfortunately, many people believe that bankruptcy relief is not available to them because they have for example, home equity (an asset) or a high-paying job (high income). This is incorrect, and people are missing out on the help the law intends to provide them. Many of these people still have the option of either a) paying back a fraction of their debts, and b) paying back their debts without interest, or with only a small rate of interest.
For example, according to Bankrate, if someone owes $25,000 on an 18% interest-rate credit card, and attempts to pay $500 on this balance each month, it will take them 66 months to pay the balance down to zero.
Had this client filed Chapter 7 bankruptcy and had no un-exempt assets, this debt would have received zero repayment, saving them hundreds of dollars a month. In Chapter 13, even if this individual had a very high income and very high assets - this debt could have been zeroed out sooner.
In practice, the vast majority of clients, even with incomes normally considered "high" would pay only a fraction of the debt back in bankruptcy. But the important point to remember is that bankruptcy is helpful for people at all income and wealth levels, and can be a very useful tool for them to get their financial house back in order without creditor harassment.
Please call or contact us via our website for a free, no-obligation consultation about your options for filing Chapter 7, Chapter 13, or working out your debts without filing bankruptcy.
False. Non-priority IRS debts are dischargeable in bankruptcy. In Chapter 13 certain penalties, interest, and older taxes do not have to be accounted for in your plan. In Chapter 7, these non-priority debts may we wiped out entirely even though you do not have a repayment plan. It is a common misconception that all IRS debts need to be paid back.
File your returns in a timely and accurate fashion, and if you ultimately cannot pay those tax debts, you may have the option to discharge those taxes in bankruptcy. Unfortunately, many people who cannot pay their taxes make the serious error of not filing a timely tax return.
Call us today at 650.259.9200 or submit a consultation form online and we can meet with you for a free consultation to discuss how bankruptcy can resolve your tax problems.
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Law Office of Jason Honaker