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Ways that Bankruptcy Filings Can Help with Past-Due Tax Debts

unpaid tax form

Believe it or not, tax day is already right around the corner. If you’re struggling to keep up with debts and have accrued unpaid tax liabilities, you may dread April 15th even more than most. Perhaps you’ve considered filing for bankruptcy to help you manage your credit card, medical or other consumer debts, but have heard that bankruptcy won’t help you with unpaid taxes. This isn’t always the case. Bankruptcy can give you more time to catch up on debts before they become permanent, and in some cases, can even eliminate those debts. Learn more below about how filing for bankruptcy can help when you owe back taxes, and speak with a seasoned Hudson Valley bankruptcy attorney if you’re facing unpaid back taxes along with other debts.

Filing for bankruptcy can stave off the filing of a lien based on a tax debt

One of the most helpful aspects of filing for bankruptcy is the automatic stay. As soon as you file for bankruptcy, a stay goes into effect that prevents debt collectors from pursuing debts you owe while your bankruptcy case is active. This stay prevents both private and public entities from taking any additional action against you for a debt you owe.

The stay is particularly helpful in preventing tax collectors from securing a debt. If you believe that the IRS or a state tax collector intends to file a lien against your property, filing for bankruptcy can prevent the filing of that lien while your bankruptcy case is active, offering you additional time to catch up on those debts. This can prevent possible seizure of your property based on a tax debt.

Some tax debts can be discharged through bankruptcy

If your unpaid tax debts are not from a recent tax year, you may be eligible to have those debts eliminated through bankruptcy. Many debtors are unaware that, when unpaid taxes are owed based on a return that was due over three years ago, for which you filed a return over two years ago, the unpaid taxes are potentially eligible for discharge through bankruptcy. However, time is of the essence to use the protections of bankruptcy to eliminate these debts, since once the debt has been secured through a lien, you will be unable to discharge it along with your other secured debts.

If you’re struggling with mounting consumer debt in New York and want a helping hand in crafting a brighter financial future, contact the seasoned and dedicated Hudson Valley bankruptcy attorneys at Rusk, Wadlin, Heppner & Martuscello, LLP in Kingston at 845-331-4100, and in Marlboro at 845-236-4411.

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