Filing a bankruptcy usually acts as a stay on IRS tax refund seizures while the bankruptcy is open. That means that from the day you file your case until the day your case is finished, bankruptcy law may protect against tax refund seizure. However, you will still have to deal with the back tax debt after filing your Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Income tax debt is not always dischargeable in Chapter 7 bankruptcy or Chapter 13 bankruptcy. There are a myriad of small requirements necessary to have your back tax debt discharged in bankruptcy. You need to speak to a bankruptcy specialist to see if your debts can be discharged.
However, there are other bankruptcy options available to individuals who owe back taxes. Most people whose back tax debt is not dischargeable choose one of two options. First, some file a Chapter 7 bankruptcy to discharge their other debts and, hopefully, discharge a portion of the back taxes; allowing for a reasonable payment on the remaining tax debt after the chapter 7 bankruptcy completes. Second, some file a Chapter 13 bankruptcy to pay back the minimum amount required by bankruptcy law, interest and penalty free, within a bankruptcy case over 5 years.
Croke & Croke, S.C.'s bankruptcy specialists understand the fear owing back Federal or Wisconsin income taxes. Contact us before filing your 2017 tax returns so that we can provide you with the best bankruptcy options to save your tax refunds from IRS or DOR seizure.