Can Bankruptcy in New York Eliminate Tax Debt?
The result can be overwhelming when someone owes a lot of money to several debtors. A mountain of debt can make someone feel like they are drowning and there is no way out. But, there is a legal solution. Bankruptcy is a legal process people and businesses can use to get relief from their debts if they cannot pay them off.
Some people may wonder if filing for bankruptcy in New York can help them eliminate tax debt. Understanding bankruptcy can be tricky, so it is best to contact a Brighton Beach bankruptcy lawyer to help you with the ins and outs. To get you started, this blog will discuss bankruptcy, the process, and different types, as well as how bankruptcy can help with overwhelming tax debt.
The Bankruptcy Process
The bankruptcy process is not too complicated with the help of a Brighton Beach bankruptcy attorney. The process includes filing a petition to the court, letting them know the debtor cannot pay their debts. Then, a trustee is appointed to manage the debtor’s assets and debts.
Different Types of Bankruptcy
In New York, bankruptcy cases are filed in federal court. They can be broadly categorized into three types: Chapter 7, Chapter 11, and Chapter 13 bankruptcy. Each type of bankruptcy has its own unique set of rules and requirements. Choosing the right kind of bankruptcy is an important decision that should be made after carefully considering one’s financial circumstances and goals.
Chapter 7 Bankruptcy
Often called “liquidation,” Chapter 7 Bankruptcy includes selling the debtor’s non-exempt assets to pay off creditors. Exempt assets in New York can include things like your home, car, social security, personal property, and retirement accounts. This means these assets will not be touched by the trustee during the bankruptcy process.
Chapter 11 Bankruptcy
This type of bankruptcy is for people and businesses with large amounts of debt. Chapter 11 is also called “reorganization” because it helps debtors reorganize their debt and devise a plan to repay their debts over time. For businesses, this type of bankruptcy can help them restructure their debt and operations to become profitable again.
Chapter 13 Bankruptcy
If you have a regular source of income and want to come up with a plan to repay your debts in 3-5 years, Chapter 13 bankruptcy may be the best option for you. If you are facing foreclosure or repossession of your assets, Chapter 13 can include those past-due amounts. You will be able to keep your assets as long as you make the agreed-upon payments.
Does Bankruptcy Clear Tax Debt in New York?
What is that old saying? “In this world, nothing can be said to be certain except death and taxes.” Tax debt can sneak up on people and result in crushing amounts of money owed. Luckily, in some cases, bankruptcy in New York can eliminate tax debt. This depends on a few factors and circumstances, like the type of tax debt and the debtor’s individual circumstances.
Chapter 7 bankruptcy can eliminate certain tax debts in New York. To be eligible for elimination during the bankruptcy process, the following requirements must be met:
- The tax debt must be for income taxes only.
- The tax return was due at least three years before the bankruptcy filing date.
- The tax return was filed at least two years before the bankruptcy filing date.
- The tax assessment was made at least 240 days before the bankruptcy filing date.
- The debtor did not commit fraud or willful evasion.
If a debtor files for Chapter 13 bankruptcy, they may be able to include tax debt in their repayment plan and have the debt paid off over a period of three to five years.
Consult a Brighton Beach Bankruptcy Attorney About Eliminating Your Tax Debt Through Bankruptcy If you find yourself wondering – will bankruptcy clear tax debt? – consult with a bankruptcy attorney in New York.
