July 19, 2018

Memo from the Desk of Theresa Rose DeGray, Esq.

“Leverage: the use of a small initial investment…to gain a very high return.”

— Dictionary.com

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I have been debating how to talk about this in a delicate manner and I simply could not figure it out. So, I will just come out and say it: People being crushed by debt can leverage their tax refunds to file Bankruptcy and get a Fresh Start. There, I finally said it.

 

It may not sound kosher but it is. Instead of using your tax refund to pay off a portion of your debt, or to buy a big screen TV, people can pay for their legal fees to get out of massive amounts of debt if they qualify and it is the right thing for them to do based on their circumstances.

 

If you, or someone you know, is struggling with debt and wants to explore this option, please contact my office and schedule a free and confidential consultation.

Taxes and Bankruptcy

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If you owe federal income taxes to the Internal Revenue Service (IRS), you may be able to discharge the debt in Bankruptcy.  In order to do so you must qualify for Chapter 7 Bankruptcy and all of the following conditions must be met:

  1. The taxes that you owe are, in fact, income taxes and not any other kind of taxes such as payroll taxes;
  2. You have not filed fraudulent returns or intentionally evaded paying your taxes;
  3. The taxes you owe were due to be paid three (3) years ago or more;
  4. You actually filed a tax return for the taxes due at least two (2) years before your Bankruptcy filing; and
  5. The taxes must have been assessed within 240 days of your Bankruptcy filing (this time period can be affected by any offers in compromise or other actions suspending collection activity).

To schedule a free consultation to discuss your specific circumstances with Attorney Theresa Rose DeGray, please call 203-713-8877.

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Sources: IRS and Nolo.

I.R.S DEBT AND BANKRUPTCY: IS IT DISCHARGEABLE?!

Whether you are listening to the radio or watching T.V, you’ve most likely heard a commercial or two about eliminating tax debts in Bankruptcy. But is it too good to be true? The fact of the matter is, it may be just too good to be true.

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Let’s take a look why.

It is possible to discharge tax debts for federal income taxes in a Chapter 7 Bankruptcy, but only if the following are true:

  • Income Tax: taxes other than income, for example, payroll taxes or fraud penalties, are some that can never be eliminated in bankruptcy
  • Fraud: committing fraud or willful evasion to avoid paying your tax is neither legal nor good for you. If you were to file a fraudulent tax return or otherwise willfully and or knowingly attempted to evade paying taxes by using false information on your tax return, not even filing for bankruptcy can help.
  • 3 Years Old Debt (at least): in order to eliminate tax debt, the tax return must have been originally due at least three years ago prior to filing for bankruptcy.
  • Tax Return: It is necessary for one to have filed a tax return for the debt that you wish to discharge at least two years prior to filing.
  • “240 day rule”: The I.R.S must have assessed your income tax debt at least 240 days before you file your bankruptcy petition.

So, the answer is more likely that not all tax debts are absolutely dischargeable by filing for Bankruptcy, but some may be.

If you have any questions, please contact us at 203-713-8877 or by clicking here.

This firm is a debt relief agency. We help people file for bankruptcy relief amongst other things, under the Bankruptcy Code.