I remember a friend of mine telling me that he was having a hard time paying his bills and was finding himself getting deeper and deeper in debt with each passing month. He even said at one point that he felt better knowing that at least he had the option of declaring bankruptcy if things got out of hand. Was he justified in thinking of bankruptcy as a backup plan?
Well, one good thing I can say about my friend is that he wasn't lying around and waiting for bad things to happen. He was working diligently to recover from his financial problems, and bankruptcy was not going to be his first choice by any means. Still, it worried me that he was so sure that bankruptcy would always be an option for him. You see, much of this debt was a combination of child support, back taxes, and student loan obligations.
Along with certain other debts such as criminal fines, the aforementioned financial obligations are difficult to get rid of even when declaring bankruptcy. This is why it's important to discuss things with a bankruptcy lawyer to know exactly what would happen if you were to file for bankruptcy in the near future. The Court does not normally allow you to get rid of child support, and student loans are only discharged if you can prove an unusually severe case of financial hardship. In other words, you have to go beyond just declaring bankruptcy to have a shot at eliminating student loans!
What about unpaid taxes? Well, there are a lot of nitty-gritty details that you have to discuss with a professional, but there are some rules of thumb that may help you. If your unpaid taxes are more than three years old and were assessed more than 240 days before declaring bankruptcy, then there's a good chance that you can have your taxes discharged with Chapter 7. However, this assumes that more than three years have passed since you filed your tax return and that you did not have any extensions or other delays in the tax collection process.
If you never filed your tax return to begin with, then the time limit hasn't started yet! If you had an extension that you filed or if you had some sort of taxpayer hearing to delay a collection, this will give the IRS additional time (usually 90 days) for tax collection.
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