How IRS Collectors Can Be Stopped By Bankruptcy
Numerous people need to pay money because of problems financially. To collect tax debts, the IRS applies certain tactics, making it the most ruthless of creditors. You can get the IRS off your bank with the protection made available by a bankruptcy claim.
Bankruptcy isn’t an easy way out of debts, contrary to common belief. People can legally search for debt relief through this, and tax debts are included. It’s possible to cancel all tax and other debts by filing for Chapter 7 bankruptcy, though without any guarantees. People are provided the chance to settle their IRS problems through a payment option when they file for Chapter 11, 12, or 13 bankruptcy.
Filing for bankruptcy gives you an ‘automatic stay’, legally protecting you from all actions against you made by the IRS and other creditors. The sole way for the automatic stay to be lifted is when creditors appeal to the bankruptcy court. However, this happens very rarely. For an automatic stay to be lifted, the IRS and other creditors must be able to give proof of fraud in the bankruptcy claim. A more serious IRS problem is likely if fraud is uncovered.
Until the bankruptcy claim is discharged or dismissed, tax debts are simply frozen. The statute of limitations resumes when bankruptcy is dismissed, definitely lengthening it.
When specific conditions such as the three-year rule are satisfied, tax debts are potentially definitely erased with a Chapter 7 bankruptcy claim. The 3-year rule essentially states that all tax debts considered are no less than three years old from April 15 of the year it was filed. Extensions are also included.
Taxes filed two years before bankruptcy is included in the 2-year rule. Taxes assessed 240 days before filing the bankruptcy claim is applicable in the 240-day rule.
If a tax lien was recorded before filing bankruptcy, the IRS still has rights to the taxpayer’s property, even by filing a Chapter 7 bankruptcy. This is a considerably important loophole that the IRS uses. Filing Chapter 11, 12, or 13 bankruptcy basically buys the taxpayer time to re-organize to solve the IRS problem.
Filed under Blog by on Oct 5th, 2009. 
