Bankruptcy Can Help Chicago Taxpayers Pay Off IRS Debt
Many Chicago taxpayers are thanking the economic downturn for at least one thing this year: a tax refund. But what if you're one of the millions of struggling Americans who still owe Uncle Sam?
Fortunately, you've still got options. Not included in those options? Not filing. Putting off your tax bill will only make things worse, as IRS penalties can accumulate faster than you can count them. Not only that, but tax debt can lead to a ruined credit score, garnished wages and sometimes even jail time. The IRS is no ordinary collection agency and they will make you pay sooner or later.
But the same things that make the IRS different can also work in your favor. Unlike most creditors and debt collectors, IRS agents usually reward communication. If you can't pay right now, don't ignore the situation - explain it. As long as you file your taxes, you might be eligible for the following solutions.
If you have a genuine hardship, you can ask for an extension to pay. Filing a Form 1127 can buy you about four months more time, if the IRS approves your request. Then it's up to you to set aside a bit from each paycheck so you can come up with the money.
You can request a monthly payment plan. If you're approved for an installment agreement, you'll need to pay everything you can afford upfront. The good news? Your debt can then be divided into monthly payments spread out over several years. The bad news? Along with an upfront fee, you'll also owe interest and a late payment penalty.
And then there's bankruptcy. Bankruptcy can help you eliminate tax debt in a couple ways. If your debt is more than three years old, you may be able to discharge it completely through Chapter 7 bankruptcy, which allows you to liquidate some assets in exchange for freeing yourself from debt. So what if your debt is less than three years old? You might still be able to benefit from Chapter 7 or Chapter 13 bankruptcy. Bankruptcy can eliminate other debts - like credit card debt or unpaid medical bills - freeing up more money that can go towards paying the IRS, or any other necessity.
A Chicago bankruptcy attorney can determine whether a bankruptcy plan can help you pay off tax debt. Why not try our free one-on-one debt analysis? Paying taxes is always painful, but it doesn't have to be impossible.