- Beerdeer
- Apr 25, 2006
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Frank Herbert's Dude
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How is tax debt handled in bankruptcy? My wife had her student loans discharged for disability and we have a big bill as a result.
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Feb 15, 2016 00:06
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May 16, 2024 20:08
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- Beerdeer
- Apr 25, 2006
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Frank Herbert's Dude
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This should not be construed as legal advice. Tax debt is a complex enough topic that I really encourage you to see a local BK attorney about this.
In a chapter 7 BK, the general rule is that federal income taxes can be discharged. However, there are a ton of caveats here. This applies to income taxes only - things like payroll taxes, late fees, fines, penalties, and so forth cannot usually be discharged. Also, the debt must be three years old, so if you haven't tried to pay it for a while, you're going to be out of luck in all likelihood. Finally you must have filed a tax return pertaining to the debt you seek to discharge, and the return needs to have been accurate. Depending on how the math works out, unless you're in a really high bracket I don't know if it makes sense to go BK over the tax bill from some forgiven student loans. My guess is you might be able to pay it off in three years.
Thanks for the info. Tax isn't our only problem, but it's one of them.
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Feb 18, 2016 19:09
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- Beerdeer
- Apr 25, 2006
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Frank Herbert's Dude
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IANAL but look into the "insolvency exception".
FYI we did this and it helped us out immeasurably
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Aug 12, 2016 03:05
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Feb 15, 2016 00:06
