Avoiding Taxes After Declaring Bankruptcy
Is it possible to avoid paying taxes after declaring bankruptcy?
Declaring bankruptcy can relieve overwhelming debt and give individuals and businesses a fresh financial start. However, it is important to understand that not all debts are dischargeable in bankruptcy, and taxes are among the debts that cannot be eliminated through the bankruptcy process.
What debts are dischargeable in bankruptcy?
When an individual or business files for bankruptcy, certain debts are dischargeable, meaning they can be eliminated through the bankruptcy process. These typically include unsecured debts such as credit card bills and medical bills.
However, there are certain types of debts that are not dischargeable, including:
- Most taxes
- Student loans (in most cases)
- Child support and alimony
- Court-ordered fines and penalties
- Debts obtained through fraud or misrepresentation
It is important to note that even if a debt is dischargeable, the individual or business may still be required to pay it if they want to keep the property associated with the debt, such as a house or car.
Can taxes be eliminated through bankruptcy?
In most cases, taxes are not dischargeable in bankruptcy. This includes most federal, state, and local taxes, as well as any penalties or interest that may have accrued on the taxes.
However, there are some exceptions to this rule. For example, taxes may be dischargeable if they are more than three years old and were due at least three years before the individual or business filed for bankruptcy. In addition, taxes may be dischargeable if the individual or business can prove that they cannot pay them and that the taxes would cause an undue hardship.
It is important to note that even if taxes are dischargeable, the individual or business will still be required to file their tax returns for the years they declared bankruptcy. Failing to do so could result in additional penalties, interest, and potential legal action.
What should individuals and businesses do if they owe taxes?
If an individual or business owes taxes that are not dischargeable in bankruptcy, they will be required to pay them even after declaring bankruptcy. Working with the appropriate tax authorities is essential to establish a payment plan or negotiate a settlement to pay off the taxes.
Failing to pay taxes can result in additional penalties, interest, and potential legal action. It is important to address tax debt as soon as possible to avoid further complications.
In conclusion, taxes are not dischargeable in bankruptcy in most cases. Individuals and businesses who owe taxes will be required to pay them even after declaring bankruptcy. It is important to work with the appropriate tax authorities to establish a payment plan or negotiate a settlement to pay off the taxes to avoid further complications.
Bankruptcy Attorney Free Consultation
If you are looking for a legal advice about taxes and bankruptcy or in need an attorney, call this law firm for free consultation. We have the Best Attorneys in Utah.
Ascent Law LLC
8833 S Redwood Road Suite C
West Jordan UT 84088
(801) 676-5506
Disclaimer: This is not legal advice and is simply an answer to a question and that if legal advice is sought to contact a licensed attorney in the appropriate jurisdiction.
