If you do not voluntarily pay your owed taxes in full and on time, the Internal Revenue Service (IRS) may commence a series of actions against you. Namely, they may seize your assets to compensate for this non-payment through garnishing your wages, bank accounts, Social Security benefits, and retirement income, or even taking away and selling your house, car, boat, or any other property. And so, if you anticipate being your fate, please follow along to find out whether filing for bankruptcy can potentially halt IRS collection efforts and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. can ensure that you get the protection you are entitled to at this time.
Does a bankruptcy filing stop IRS collection efforts?
One of the more appealing things about consumer bankruptcy is that it prompts the New York State bankruptcy court to order an automatic stay. Specifically, this order immediately stops most creditors from continuing or commencing collection efforts against you, as the debtor. Of note, the automatic stay may be effective enough to hold back a creditor as powerful, established, and significant as the IRS.
Why did the IRS resume collection activities after my bankruptcy?
Importantly, you must understand that the operative word “stop” does not equate to “eliminate.” This is to say that the IRS may hold the right to resume collection activities against you once your bankruptcy case closes. In short, this is essentially because not all debt types are eligible for a discharge in your case.
When the New York State bankruptcy court orders a discharge of a certain debt, it eliminates it from your immediate financial responsibility and thereby prohibits your creditors from seeking further collection of payments. In a Chapter 7 consumer bankruptcy case, this discharge may occur 60 to 90 days after the first 341 meeting of creditors. For Chapter 13, this may be once you complete your court-ordered three- to five-year repayment plan.
Further, Chapter 7 may discharge your personal liability for tax debts older than three years. The same goes for Chapter 13 bankruptcy, in addition to tax debts already paid off in your repayment plan. With that being said, in this period, the IRS is not blocked from pursuing tax debts from tax returns you failed to file on time. They can also continue to go after trust fund taxes and other nondischargeable tax types.
Rest assured, you may be eligible to set up a payment plan to pay off your outstanding balance of nondischargeable tax debt over time. That is, you may apply for a long-term payment plan if you owe $50,000 or less in taxes, penalties, and interest, so long as you have filed all your required tax returns. Or, if you owe $100,000 or less, you may request a short-term payment plan to pay off in 180 days or less.
If you still have lingering questions at this point in time, please do not hesitate to reach out to a talented Rockland County bankruptcy attorney. The team at The Law Offices of Allen A. Kolber, Esq., P.C. will certainly be the perfect fit for you.
