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I owe approximately $40,000 to IRS and approximately $25,000 in personal debt. Is Chap 13 my best option? Thank you
Anonymous8 views10 answers
As stated I owe the IRS debt and trying to make payments monthly, but very hard financially. $700 per month alone in IRS payments and they will not work with me on that payment. I now have other person debt due to my situation and quality of life is horrible now. I won't go into detail, but series of events that got me to this place, layoff, etc. I have the IRS debt, student loan $7000 balance and other personal debt as stated $25000. I am working and make $50000 annually. If I file chap 13, how much income will I have left each month after paying the court once chap 13 filed? I am not sure if there is a standard schedule the court goes off of to determine what my payment amount will be once I file 13. Any advice will be very helpful. Thank you very much for your time.
See a bankruptcy attorney experienced in how to handle tax debt in bankruptcy. Some of the tax liability may be dischargeable depending on a five step analysis. Depending on income you may also qualify for a "Chapter 20" wherein you discharge the personal debt in a Chapter 7, then file a chapter 13 for the tax liability. You won't get a discharge on the chapter 13 but it won't matter if you pay the IRS in full through your plan. Don't despair and get competent legal advice. Good luck.
Your situation presents complicated issues that only a detailed analysis by a reputable and experienced bankruptcy attorney can give. Whether you should file a Chapter 13 bankruptcy vs. a Chapter 7 depends on many factors, such as your income and ability to pay, whether the taxes are dischargeable, whether you have any non-exempt assets that might be seized by a Chapter 7 trustee and liquidated for the benefit of your creditors, and other factors. If you do file a Chapter 13 bankruptcy, how much you have to pay is also determined by a number of different factors, including whether any of the tax debt is secured, the value of your assets, and your ability to pay. Make an appointment with a reputable bankruptcy attorney to sort through the details and come up with a good plan for how to proceed.
Depending on the age of the IRS debt, it is possible to discharge much of it in a Ch. 7 provided it has been more than 3 years since you filed your returns, and, there were no waivers of the statute of limitations or extensions for the IRS to approve a payment plan.
With respect to student loans, neither a CH. 7 or 13 will discharge them.
However, a Chapter 7 would discharge the $25k in unsecured personal debt, and after that you could file a CH. 13 with a confirmable plan to handle student loans and residual IRS debts over a 5 year period. The Ch. 13 would not result in a discharge though.
Why not just do a Chapter 7 bankruptcy and get rid of the personal debt of $25,000? The tax debt that you have may or may not be discharged, depending on a lot of different factors. If the tax debt is not dischargeable, you would need to pay it all through a Chapter 13 anyway, and your payments would probably be just as high as the IRS is making you pay right now because they would all need to be paid in full over 60 months.
If you file a Chapter 13, you will need to do a means test and a budget. Your monthly plan payment will be based on a combination of (1) your means test results, (2) your budget, and (3) how much you need to pay to the IRS. It is a very complicated thing to do and you should go in and meet with a qualified bankruptcy attorney to discuss your options. Use the Find Lawyer feature on to find somebody near you. Most attorneys will give you a free consultation. Good luck to you.
Chapter 13 may be the best option. Take your tax returns and all IRS correspondence to a bankruptcy attorney for review. An attorney should be able to determine which tax liabilities are dischargeable. A bankruptcy attorney should also be able to provide you a rough estimate of what the Chapter 13 plan payment would need to be to treat the non-dischargeable / secured / priority tax debt.
There are definitely alternatives to Chapter 13 for resolving your tax debt and other misc. debt. Chapter 7 may be part of the solution. A tax attorney may also be able to offer a solution through such action as an offer in compromise. No matter what, I would consult with a bankruptcy attorney to see how bankruptcy could help you. That information will be invaluable for determine which course of action makes the most sense for you.
Your tax liabilities may or may not be dischargable depending on whether you filed the returns for those tax years, when those were filed, etc. Your student loans are also not likely dischargable. Make sure that an attorney will pull and review your IRS tax transcripts.
I am just piping in here to answer the one remaining question that no one appears to have answered - how much will you have left to spend in a Chapter 13 after paying money into your plan. In most places, the chapter 13 will leave you with NOTHING EXTRA so your budget needs to account for every soda or cup of coffee you feel is part of your necessary living expenses. Chapter 13 is a hard program and should be used only when the alternative is much harder. Hope this perspective helps!
You need to speak with a good local BK attorney in person. If your taxes are old enough and you meet other qualifications, you may be able to wipe them out with a Chapter 7.
Rob
It is not possible to tell you how much income you will have left without more information. I offer a free consultation where I go over what the plan payments would be in Chapter 13. Chapter 13 is probably a good option for you because you can pay the taxes back over five years with no interest or penalties and with your income, you could probably discharge the unsecured personal debt. Make an appointment to sit down with an experienced chapter 13 attorney to see if it is best for you.
