What Happens To Taxes If You Convert A 13 To 7
My question involves bankruptcy in the state of: Maryland
I filed a Chapter 13 case a year ago to resolve tax issues. A year later because of changes in job and higher cost of gas and food. I want to convert my 13 to a seven. What happens with the tax debt? I know it does not go away but doe they settle then for pennies on the dollar??
Re: What Happens To Taxes If You Convert A 13 To 7
Actually depending on your situation a bankruptcy judge CAN discharge taxes. I have seen it done many times before. DO NOT believe that taxes can not be discharged it is NOT true. They sure can be in a chapter 7.
Student loans on the other hand CAN NOT be discharged.
Bankruptcy judges have full discretion on discharging taxes, both state and federal. Talk to a bankruptcy lawyer.:D
Re: What Happens To Taxes If You Convert A 13 To 7
Not all tax debts are dischargeable, and sometimes the best approach is an offer in compromise. Putting it in simple terms and speaking generally, unsecured income taxes (i.e., not secured by a tax lien) that were first due more than three years before your bankruptcy is filed, and for which a timely and non fraudulent return was filed, can be discharged in full in bankruptcy. The devil is in the details, so it's definitely something to discuss with your lawyer.
Re: What Happens To Taxes If You Convert A 13 To 7
Just to throw in my 2 cents, with regard to federal tax debts I agree with Aaron's response 100% but want to add that my understanding is that state tax debts do not follow the same guidelines and are actually not dischargable in Bankruptcy at all.
Re: What Happens To Taxes If You Convert A 13 To 7
For the most part, the same rules that apply to federal taxes also cover state income taxes - with one peculiar glitch. Most, if not all, states require you to file an amended state tax return whenever your federal tax liability for a given year changes (perhaps as a result of an audit). Some courts hold that when you fail to file an amended state return in this situation, your initial state return is deemed "unfiled." The result is that your entire state tax -- and not just the amount that would have been added had you amended the state return -- can no longer be discharged in a Chapter 7 filing.
You really need to talk to your lawyer.
Re: What Happens To Taxes If You Convert A 13 To 7
State taxes may also be dischargeable; but as with federal taxes, it's something best discussed with your bankruptcy lawyer.