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Bankruptcy is a procedure which is filed when a person is unable to fulfill the debt repayment obligations. A bankrupt person’s assets and debts are placed into a bankruptcy estate. The type of bankruptcy filed by the person will determine the nature of tax obligation. When a bankrupt person’s debt is cancelled the IRS may see that as a taxable income to the debtor, however if it is cancelled through bankruptcy it is not considered an income. Since bankruptcy has many elements and procedures, the law can become quite confusing and may seem complicated and may give rise to many questions that are asked to lawyers online. This article provides answers to some of the most commonly asked questions about such issues. Under Chapter 13 bankruptcy is a person entitled to some tax reliefs?
Under this provision a person may enjoy relief from paying tax penalties and the accrued interest. In case the person was not entitled to a discharge and has a new Chapter 13 case then the forgone taxes and penalties will get revived and the person would be obliged to pay them. The person can hire an attorney to explore if there are any exceptions the benefit of which he / she can avail of. The person may want to consider payment plans the IRS usually offers. In the state of Colorado if a married person’s spouse has an IRS lien on a jointly owned house and one of them files for bankruptcy, is the other spouse liable for any debt?
In Colorado unless the spouses co-sign or guarantee the debt for the other spouse, neither of them is responsible for the other’s debts when either of them files for bankruptcy. In case the spouse does not file for bankruptcy the creditors might claim the payment of debts from both of them if the property is held jointly. Colorado being a non-community state, the debts of one spouse have no legal bearing on the other. What can be done if the IRS tries to tax a home for a debt that was owed on a foreclosed home?
One should visit an accountant and try to find out whether the income he / she has is taxable or not. The accountant might try to reduce or eliminate the tax liabilities. In case the debtor pursues the person then one can file for bankruptcy and thereby wriggle out of the debt and tax burden. If a person with assets and land in a foreign country wants to file bankruptcy is it possible for the trustee to look these assets up?
When a person files for bankruptcy the trustee uses every possible means to find out whether he / she has any property in a foreign country. However, in some third world countries it is difficult to ascertain if the person owns any property there since in many cases records of properties are not properly maintained by those governments. In such cases though the trustee may not be able to find the properties, it is incumbent upon the person to claim these assets on the bankruptcy claim since suppression of assets is a criminal offence. IRS debt and bankruptcy are sometimes confusing to people. If a person owes IRS debt and files for bankruptcy questions may arise as to what should be included in that, whether the debt can be included, or if the IRS has a way for the individual to pay the debt. Since these are complicated legal matters it is better to ask a bankruptcy lawyer to decide the best course of action.
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