Does bankruptcy cover money owed to the IRS?
admin | Apr 01, 2010 | Comments 3
I owe like $60k in credit card debt and and additional $41k to the IRS. The reason I owe the IRS so much is bcs I didn’t pay my taxes for 3 years and filed all 3 years at once, and $6k of the $41k is penalties. The IRS has threatened a levy against me unless I can make the amount I owe cut-rate to under $25k. I’m self employed and work in finance and have only made about $6k this year. My credit cards are all maxed out, too. I’m basically out of option, but I don’t want to file for personal bankruptcy AND still have to pay the IRS $41k. So….does bankruptcy extinguish any debts owed to the IRS too? Thankfulness!
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Filed Under: Bankruptcy
Nope
IRS debt and student loans cannot be included in bankruptcy.
Generally, No.
The exception is if the taxes were assessed over 3 years ago.
No it does not. If you file bankruptcy, you will still owe the IRS everything you currently owe them, and the penalties and interest dollars are increasing.
You should call the IRS and work out a repayment plot with them. There will be forms to fill out and there will be a point where you caution them how much you can afford to pay. Pick a realistic number, but err on the low side — because they are more than likely going to caution you that you have to pay more per month than you place down; generally their target is five year repayment. The sooner you sort it out, the better, because the penalties stop when you work out the repayment plot, even if you continue to pay interest on the outstanding balance.
Now, if you have unquestionably no assets, you may be able to work with them to settle for less — but that won’t work if you have business or personal assets, including your household, any cars, boats, campers, etc., etc.
Excellent luck.