Many California residents are continuing to feel the aftereffects of the recent recession, and are struggling to regain financial stability. For some, high levels of credit card debt are a major concern. Others face home loans that are for more than their property is currently worth. Still others are saddled with old tax debt, and see no way of paying down those obligations. It is important for consumers to know that it is possible to eliminate tax debt through a Chapter 7 bankruptcy.
The first step in assessing whether your existing tax debt could be included within a bankruptcy proceeding is to gather old returns. Many of the requirements rest upon the dates related to each tax return. So, begin by collecting that information and preparing to check the date ranges.
In order to successfully discharge tax debt during a Chapter 7 bankruptcy, the taxpayer must not have filed a fraudulent return, or be guilty of tax evasion. The filing deadline must be at least three years prior to the bankruptcy filing. The return must have been filed at least two years before initiating bankruptcy. Finally, any tax assessment related to the debt must have been made at least 240 days ago.
If all of these stipulations are met, it may be possible for a California taxpayer to include the applicable tax debt within their personal Chapter 7 bankruptcy. Doing so can lead to the discharge of these obligations, as well as the elimination of credit card debt, medical bills and other unsecured debt. The end result can be a fresh financial start, and the chance to build a strong financial foundation for the years to come.
Source: The Monterey Herald, Barry Dolowich: Bankruptcy and tax liability, Barry Dolowich, March 4, 2014