Can Bankruptcy Stop Tax Garnishments

You can stop tax garnishments by filing for bankruptcy. Even if you owe the IRS, those garnishments stop. Unfortunately, most of these debts cannot be wiped away, but a bankruptcy filing can allow you to pay back what you owe on your own terms. You will not be forced to provide a certain portion of your paycheck to these debts, allowing you to pay your expenses how you see fit.  Some taxes can be wiped clean, though. With a bankruptcy filing, you could free yourself of that garnishment forever. The rules applied to taxes can be complicated because, as stated before, some of these debts must be paid back while you can completely rid yourself of others, but we can explain all of this to you in the consultation. Tax issues vary from person to person so it is difficult to provide clear answers without a definitive situation, but you may be eligible to set yourself up with an affordable payment plan for those taxes that you have to pay. For example, instead of owing $12,000 outright, we may be able to arrange it for you so that you can make payments as low as $52 per week to take care of those debts. The best way to find out what we can do for you is to set up a free consultation so that we can address your personal situation and see how a bankruptcy filing would affect your bottom line.

A Chapter 7 filing affects your tax debts differently from a Chapter 13 filing. In a Chapter 7, the only IRS tax that can be discharged is "income" tax. Withholding taxes cannot be discharged. The tax returns must be three years past their due date in order to be included and they also must have been filed at least two years before the the Chapter 7 was filed. Also, the tax must have been "assessed" by the IRS at least 240 days before filing. It should also be noted that you cannot include taxes that were filled out fraudulently.

In a Chapter 13 case, the same rules apply, but there are also added benefits. One of those benefits is that you can rid yourself of any tax penalties even if the taxes in question are non-dischargeable. The other benefit is that the filing of a Chapter 13 prevents the IRS from assessing future penalties and interest which can greatly affect the final amount you end up paying.

Things can get even more complicated if the IRS files a tax lien. We can explain all of this in the initial consultation for you.