Personal Bankruptcy Questions

One of the most common questions that often come up regarding bankruptcy is what exactly you can discharge during a Chapter 7 proceeding. So, should you declare bankruptcy? Well, that depends on a lot of factors that you should discuss with a good bankruptcy lawyer. One of those factors, of course, is what kind of debts can be discharged.The reason it’s important to look at the specific kinds of debt that you hold is that bankruptcy will not eliminate every kind of debt. Some kinds of financial obligations are more difficult to eliminate than others. For example, the federal bankruptcy court does not usually look kindly on unpaid child support or criminal fines. Likewise, student loans are difficult to discharge unless you can prove an unusual level of financial hardship.

This is because banks would be less likely to lend money to students if the loans could be wiped out easily with a bankruptcy proceeding. So, if the debts that are giving you the most trouble are the aforementioned obligations like child support or student loans, then bankruptcy may not be the solution to your problems.

What about federal income taxes that you have yet to pay? Well, there are a lot of specific regulations that you need to work out with the help of your bankruptcy lawyer. However, you can make some generalizations. If your tax return was filed more than three years ago and the tax was assessed more than 240 days before bankruptcy, then there is a good chance you could have your taxes discharged.

Keep in mind that any interruptions such as a taxpayer hearing or even an extension that you file will interrupt the three year time limit and give the IRS extra time to collect your unpaid taxes. Also, the three-year time limit assumes that you actually filed your tax return. If you never filed, then the clock has never started ticking. As you can see, all of these federal regulations are complex. Anything coming out of Washington is usually not user-friendly, and the tax codes and bankruptcy rules are no exceptions. Your best bet is to find out as much as possible with the help of a professional before making your move.

Click here for more information on should you declare bankruptcy.