Bankruptcy and Income Taxes

Income Taxes and Bankruptcy

Our Hawaii Bankruptcy Attorney Reviews the Facts

Individual and married couples file for a bankruptcy in Hawaii for many different reasons. Some found themselves under unbearable debt from medical bills; others lost their jobs and had to use credit cards to survive.

Past due income tax debt is increasingly common during times of financial hardship. The IRS has can be a powerful creditor and file liens against your property to collect. Our Hawaii bankruptcy firm offers people struggling with past due income taxes Chapter 7, Chapter 13 bankruptcy and tax resolution services, so you have many options when you decide to take the first step towards starting your financial life anew.

Are Income Taxes Dischargeable in Bankruptcy?

The good news for people with old income tax debt is that can be discharged in both Chapter 7 and Chapter 13 bankruptcy. The US Bankruptcy Code stipulates the criteria that must be met in order for a tax liability to be discharged:

  • The due date for the taxes was at least three years ago
  • The return for the owed taxes was filed at least two years ago
  • The tax must have been assessed by the IRS at least 240 days before the bankruptcy is filed (an assessment is when the IRS is made aware that a balance is owed, typically the date you filed the return)
  • You must not have committed tax evasion or fraud (this does not include honest mistakes)

If your past due income taxes fulfill this criteria, a Chapter 7 or a Chapter 13 bankruptcy might be good options for you to consider. Our experienced lawyer will explain the entire procedure to you and offer experienced and qualified representation throughout the process.

Do Not Ignore IRS Notices; Bring the Notice to Our Office at Once

If you are facing back income taxes, the worst thing you can do is ignore notices from the IRS. The first step to an IRS collection would be to send you a Notice of Federal Tax Lien. If you receive this notice, you should speak to a qualified attorney immediately. There would still be time to file Chapter 7 or Chapter 13 bankruptcy, which would halt the IRS collection process and prevent the lien from attaching to your property.

After you receive the initial notice, the second step is for the IRS to attach and record the lien. Once a lien is attached, it is a secured interest in your property. You can still file for bankruptcy, but it will be much more difficult, if not impossible, to discharge the tax debt once it is recorded as a lien.

Solve Your Income Tax Problems Without Bankruptcy

If your income tax debt does not meet the criteria for discharge, our Honolulu office offers alternative paths to financial freedom. Blake Goodman offers tax resolution services. As your attorney, he can negotiate with the IRS on your behalf to achieve the best possible outcome for your situation.  To its credit, the IRS offers multiple potential solutions to individuals who owe a significant amount of back taxes.

Tax laws are notoriously complex, as are the laws that govern the bankruptcy process. If you are considering filing for bankruptcy or are in need of tax resolution services, we can help. Contact our office or fill out our questionnaire today and let us help guide you through the process of getting your life back on track towards a financially sound future.