Are you considering bankruptcy as an option to resolve tax debt? Declaring bankruptcy is an option for tax debt relief, but you should understand how filing bankruptcy works and the different types before you move forward.
Filing bankruptcy is a legal procedure that allows individuals and businesses to absolve or reorganize debt that’s owed to creditors. There are various chapters of bankruptcy, each of which has different parameters for if and how debt has to be paid back. The types of bankruptcy you can consider if you owe back taxes include:
Chapter 7: A Chapter 7 bankruptcy may resolve all or part of your debt. If you have assets you be required to liquidate them to pay back debts.
Chapter 11: Reorganize debt with a Chapter 11 bankruptcy. This type of bankruptcy is typically used by businesses to recover profitibability after landing in debt.
Chapter 12: Special leniencies are granted to fishermen and farmers through Chapter 12 bankruptcy.
Chapter 13: With a Chapter 13 bankruptcy, you can devise a plan to pay back your debts.
There are certain qualification requirements for each type of bankruptcy, and filing for bankruptcy doesn’t necessarily mean you won’t have to pay your back taxes. For more bankruptcy info or help filing, speak with one of our professional as soon as possible and learn more in our bankruptcy articles below.