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How Does Chapter 13 Bankruptcy Affect Tax Debt?

Posted in: Bankruptcy

Navigating the financial waters of debt and taxes can be overwhelming, especially when faced with the prospect of bankruptcy. Debt Pros is dedicated to helping clients understand and manage their financial obligations, particularly when it comes to the intersection of Chapter 13 bankruptcy and tax debt. In this blog post, we’ll outline how our firm can guide you through these complex legal processes.

Pen Laying On Bankruptcy Filing Papers

Understanding Chapter 13 Bankruptcy and Its Implications

Chapter 13 bankruptcy, often referred to as a wage earner’s plan, allows individuals with a regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. For those facing overwhelming debt, Chapter 13 offers a path to financial recovery, providing the opportunity to reorganize and gradually clear their financial slate while retaining their assets.

One of the most significant advantages of Chapter 13 bankruptcy is the automatic stay. This powerful legal provision halts creditors from pursuing collection actions, giving debtors much-needed breathing room. However, it’s crucial to understand that while Chapter 13 can restructure various debts, it has specific implications for taxes owed, which requires careful consideration.

The Interplay Between Tax Debts and Chapter 13 Bankruptcy

Tax debts are unique in bankruptcy proceedings. Not all tax debts can be discharged, but Chapter 13 bankruptcy can help manage and potentially reduce the amount owed. Priority tax debts, such as recent income taxes, must be paid in full through the repayment plan. However, older tax liabilities may be treated as non-priority debts, allowing for possible discharge at the end of the bankruptcy period if they meet certain criteria.

It’s important to note that tax penalties can sometimes be reduced or eliminated in Chapter 13, depending on the age of the debt and whether the tax itself is dischargeable. Additionally, Chapter 13 can stop accruing interest and penalties on certain tax debts, providing significant financial relief.

Options for Owing Taxes While in Chapter 13 Bankruptcy

When you file bankruptcy, your tax debts are categorized into priority and nonpriority claims. Priority tax debts must be paid in full during the bankruptcy plan, but there are strategies to manage this obligation effectively. For example, we can structure your repayment plan to prioritize remaining tax debts, ensuring you stay compliant with the IRS while addressing other debts.

Non-priority tax debts, which typically include older income tax debt, can be treated like other unsecured debts, such as credit card balances. This means they can be paid proportionally to your ability to pay, and any remaining balance at the end of your Chapter 13 plan could be discharged.

How Wonais Law, LLC Can Help with Owing Taxes While in Chapter 13

At Debt Pros, we understand the stress and uncertainty that come with tax debt during bankruptcy. Our team of expert attorneys has years of experience in both bankruptcy law and tax resolution, making us uniquely equipped to handle these intertwined legal issues.

We start by thoroughly analyzing your financial situation, including your tax obligations, to determine the best course of action. Our goal is to create a Chapter 13 repayment plan that is both manageable for you and acceptable to the bankruptcy court and the IRS.

Person Pointing With A Pen On Bankruptcy Chapter 13 title

How an Experienced Bankruptcy Attorney Can Help if You Owe Taxes

Our firm can also negotiate with tax authorities on your behalf. We’ll work to ensure that your tax debts are accurately classified within your bankruptcy case and that any eligible debts are discharged at the end of your repayment period. If you have non-dischargeable tax debts, we’ll strive to reach an agreement with the IRS for a payment plan that begins after your Chapter 13 plan is completed, allowing you to maintain financial stability.

Throughout the process, we provide personalized legal counsel, keeping you informed and empowered to make the best decisions for your financial future. We’re committed to advocating for your rights and interests every step of the way, from the initial filing to the completion of your Chapter 13 plan.

At Debt Pros, we understand the stress and uncertainty that come with managing tax debt during Chapter 13 bankruptcy. Our approach is comprehensive and proactive, focusing on your long-term financial health. Here’s how we can further assist you:

Negotiation with Tax Authorities

We will engage in discussions with the IRS, other tax agencies, and bankruptcy courts to negotiate the terms of your tax liabilities. Our goal is to minimize your debt and arrange manageable payment terms.

Accurate Debt Classification

We ensure that your tax debts are properly classified while filing bankruptcy, distinguishing between priority (non-dischargeable) and non-priority (dischargeable) debts.

Discharge Eligibility

For eligible debts, we will work diligently to have them discharged upon the completion of your Chapter 13 repayment plan, potentially relieving you of certain tax liabilities.

Legal Counsel and Advocacy

Our team provides personalized legal advice tailored to your situation. We keep you informed about every aspect of your case and empower you to make informed decisions.

Protection of Rights and Interests

We are staunch advocates for your rights and interests, ensuring that you are treated fairly throughout the bankruptcy process.

Strategic Planning

We help you plan strategically for your financial future, considering both the immediate impact of your bankruptcy case and your long-term financial goals.

Comprehensive Support

From the initial consultation to the successful closure of your case, we offer unwavering support and guidance.

By partnering with Debt Pros, you can trust that we will take every possible step to address your tax debts effectively within the framework of your Chapter 13 bankruptcy. Our commitment is to help you emerge from this process on a stronger financial footing.

Hire an Experienced Maryland Bankruptcy Attorney to Navigate Your Tax Repayment Plans

Chapter 13 bankruptcy offers a lifeline for those drowning in debt, including tax liabilities. While the process can be complex, especially when taxes are involved, you don’t have to face it alone. At Debt Pros, we’re here to help you navigate these challenges and emerge with a fresh financial start. If you’re struggling with tax debt and considering Chapter 13 bankruptcy, reach out to us. Together, we can chart a path toward a brighter financial future.

Client Testimonials

What Our Clients Say

I want to start by saying THANK YOU! John was patient, prompt, informative and easy to work with. In our time of need, he helped my parents file for bankruptcy successfully and at a great price. If you are ever in the need of any services concerning your debt and potential bankruptcy litigation, I give my word and experience that John is the BEST in the Chicagoland area.

- Eric McDowell

John was outstanding in the process of my chapter 7. Not only did he keep me abreast of every step and matter that involved my BK but he was reasonable with the price and the time I had to pay him. He sent me places that accepted my Bk when it came to getting a new car as well and his communication was an A+. There was never a time I couldn’t reach him and if he missed my call he would proceed to call back before the day over or early the next day. I recommend him to any and everyone!

- Lamar Johnson

John is a great lawyer to work with. It’s easy to be honest and share things with him. It felt good to communicate with him. When I reach out to him, he is very good at answering the phone or responding when he can. I recommend his work as well. He’s very organized and gets things done. Thank you John.

- JP W

This guy made my experience so smooth I would recommend him to anyone who is thinking about filing for bankruptcy. He is very patient with his clients and Is very informative. Every question I had he answered even if I asked it twice. Highly recommend!!!!!!

- Nikita Nichols

John is very patient, he’s worked with me from start to finish. Always answer my questions and never made me feel like I’m a bother. Never made me feel like I’m a number in his book. He’s very helpful and caring which is why I’d recommend him over any bankruptcy lawyer. Thanks John for all you do.

- Corey Ross

Thank you team DebtPros! The choice to file was not easy, but it was the best decision for my family. John, I appreciate your kindness, thoroughness, and professionalism. I feel like you’ve guided me through this process in a very personable way. Thank you for always being available to chat, and making the experience so efficient and understanding. I can see the silver lining toward a fresh start! Thank you again & Have a wonderful summer. Sincerely, SB.

- Shelly Boyki

I am honored to provide such a financial relief feedback for this amazing blessing whose name is Atty. Wonais. There is so much I could share endlessly about his superb knowledge and service that he offered me as his client. However, I will share what I found to be essential in my financial issues that Atty. Wonais selflessly provided to me as his client; his expertise, his ability of trustworthiness was "everything" oh my goodness he is truly trusting thru the entire process.

- Val B.

I was referred to them, and this has been the best decision I have ever made. I never been this confident in a person like I am with John. He heard my needs and wants, he made it possible to give me that. Excellent customer service. He put all my options on table to fit my needs. He never sugarcoat he gives it to you like it is meaning he’s not rude or unprofessional. He’s that person that tells you what you need and bot what you want. I have referred all my friends and family to his service.

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So one night I went online looking for advice on google and John came up and I called him on the weekend late evening and he happened to answered which was awesome. John helped me out with my situation he gave me amazing advice and options on how to take on my problems the right way. John is super easy to talk to Very informative and he answered all my questions.

- Freddy

This office and staff was amazing. I was referred to John from my best friend and as soon as I reached out he was very prompt on getting back to me and helping. From start to finish the process was amazing stress free and straight forward. He stayed in communication no matter what time of the day. If I had a question he had the answer. His tips and tricks and knowledge helped me a lot and made me more comfortable and excited about starting over.

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John took me on as a client with no problem. He was very understanding, passionate, helpful and available every step of the way. Trust me I am a very happy client, I definitely recommend John.

- Jessica Burton

John did a wonderful and seamless job with my case-he handled everything properly and was very timely in all of his communication. He is professional and reliable. I would highly recommend him to anyone who may have to deal with a bankruptcy. Five stars!

- Ashley I.

I had a great experience with Wonais Law, LLC. John is very patient and replies right away to any questions or concerns that you have. I would recommend his services to anyone.

- Erika Sing

If I can leave more stars I will. Wonaia Law is highly recommended. John is great with making sure I understand everything that was going on, I really appreciate how he’s always there to answer any questions I have ... My chapter 7 is just about over and I have 2nd chance with living life debt free.

- Tiffany Austin

John Wonais is responsive, professional, and cares for his clients. He is extremely experienced in civil litigation and has answered all of my questions in a way that I can understand as someone with zero experience in law. He has gone above and beyond and has always made sure to follow up with me when I’ve needed it. I truly feel that he has my best interest at heart.

- Ariana Khosravani

I really wanna give a big thanks to John he helped me out a lot. He walked me through everything to make sure I understand, good quality. I don’t think I could of did it without him ?

- Twona Gibson

He gave an expert and advise and a great service. He went all out to be sure I got a solution to the issue I had.

- Betty Salami

I want to thank John for helping me win my case he was very helpful throughout the process and very professional, thanks again.

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I was very impressed on how quickly I was responded to, and how my lawyer John made everything so easy for me to understand. I have never had to hire a lawyer before, and I'm really glad that I met such a professional, and honest person. I would highly recommended.

- Angela Mata

DebtPros is a law firm that specializes in consumer bankruptcy. John has years of valuable experience and is dedicated to helping clients file for bankruptcy. John is responsive and provides a free consultation to prospective clients. I recommend this firm to anyone who is considering filing for bankruptcy.

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John Wonais provided me with timely and beneficial legal counsel. I would trust his firm to represent me in any creditor-related case. John's professionalism and expertise are second-to-none; highly recommend his services.

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Very helpful, professional and they’re reasonably priced.

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Great Professional Service- I have been working with Wonais Law the past couple weeks and I have been blown away from their attention to detail and professionalism. They get work done quickly and are extremely responsive. I would recommend this firm to everyone needing legal services.

- Andres Jara

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