Is the Internal Revenue Service threatening to garnish your wages or seize your bank accounts? Are you being threatened with a tax lien against your home or other property? If so, there is a better solution for paying your IRS debt than entering into a payment plan with the government. It is difficult to pay off your tax debt when the IRS continues to add interest and penalties to the balance you owe. In fact, it is almost impossible to pay off tax debt within a reasonable period of time. More and more of your income has to be used to pay the large monthly payments that the IRS demands when you enter a payment arrangement to settle your tax debt. This causes you to fall behind on other monthly obligations and places your home and car in jeopardy.

Dealing with tax debt is stressful and frustrating. Navigating the bureaucratic red tape of the Internal Revenue Service can be confusing. One mistake will cost you hundreds if not thousands of dollars in penalties and interest. Rather than risking wage garnishments or tax levies, you can file a bankruptcy case to possibly discharge your tax debt or spread out the payments under a bankruptcy plan that you can afford.

Can IRS tax debt be discharged in bankruptcy?

Given the right set of circumstances, you can discharge tax debt through a bankruptcy filing. This means that you would no longer be liable for the repayment of your tax debt. In order to be eligible for a discharge, the tax debt must meet the follow criteria:

• The tax debt must have originated from personal income taxes.
• There can be no fraud with regard to the filing of your tax returns and no willful evasion of the tax debt.
• The tax debt must have originated at least three years prior to the filing of the bankruptcy.
• The tax returns were filed at least two years prior to the bankruptcy.
• The IRS must have assessed the tax debt at least 240 days prior to the filing of the bankruptcy petition.

If the tax debt is not eligible for discharge under a Chapter 7 bankruptcy, you can still find relief from your tax debt by filing a Chapter 13 bankruptcy. An experienced bankruptcy attorney will advise you of all of your options and help you decide which option is best for you.

How is tax debt handled in a Chapter 13 bankruptcy?

When you file a Chapter 13 bankruptcy, your tax debt will be included in your bankruptcy plan and paid over a 3 to 5-year plan. There will be no interest paid on the tax debt unless the IRS filed a tax lien. Most taxes are paid as unsecured debts at 0% interest. For tax liens, the interest rate paid is typically much less than the interest rate you would be charged if you worked out a payment arrangement with the Internal Revenue Service. Because your tax debt is spread out over several years, the payment is typically much lower than if you negotiate with the IRS directly.

Stop IRS wage garnishments

If the IRS has notified you of its intent to garnish your wages or if your income is already being garnished, filing a bankruptcy case will stop garnishments immediately. When you file a bankruptcy case, an automatic stay immediately goes into effect preventing creditors, including the Internal Revenue Service, from continuing collection efforts. This includes, but is not limited to, wage garnishments and tax levies. A Michigan bankruptcy attorney can help you keep your wages and stop garnishments through bankruptcy.

Talk to a Michigan bankruptcy attorney for free

The Law Office of Gene F. Turnwald offers free bankruptcy consultation so that you can learn how bankruptcy can help you with your tax debt. Our law firm has convenient office hours to accommodate your schedule. Attorney Gene F. Turnwald has 21 years of experience helping clients solve their tax problems through the bankruptcy court. Because he is an experienced bankruptcy attorney, Mr. Turnwald knows how to help clients find affordable solutions to their debt problems. Contact our office at (517) 347-6700 or gturnwald@comcast.net to schedule your free consultation today.