Bankruptcy can prevent future income tax lien recordings against your home. The result: paying nothing on the tax vs. paying it in full.
Filing bankruptcy stops tax collection just like it stops other debt collection by more conventional creditors. But there are exceptions.
In spite of you filing bankruptcy, the taxing authorities can still take certain very specific actions as exceptions to the automatic stay.
Chapter 7 gives you immediate protection against creditor collection actions. Chapter 13 protects you longer, if needed.
Here's an illustration how a Chapter 13 case would pay your taxes that you could not discharge (write off) in a Chapter 7 bankruptcy.
If you want to keep your business operating but owe too much in taxes, a Chapter 13 case will protect your business while buying you time.
If you are thinking about filing bankruptcy and have a tax refund coming, you can usually keep your refund if you get advice about doing so.
A tax lien may attach to assets worth more than the amount of the underlying tax. That could make either a small or a huge difference.
Bankruptcy gives you power over the IRS in getting rid of a tax lien. Chapter 13 in particular empowers you to value and pay off a lien.
With very few limited exceptions the IRS/state must stop all collection activity, from the beginning to the end of your bankruptcy case.
Can the IRS seize your car or truck in payment of a tax debt you owe? Yes, if it has substantial equity. Will it do so? Possibly.
You may not think of bankruptcy as a solution to your tax problems. But do look into it before the tax collector starts grabbing at you.
Bankruptcy can do so much more than write off old taxes and buy time to pay newer ones. So if you owe lots of taxes, it's worth considering.
You are protected from the very powerful collection capabilities of the IRS during bankruptcy virtually as if it were just any other creditor.