BANKRUPTCY – the word alone indicates a misleading sense of failure, lost and defeat.
Given the Government’s current depressed economy, Taxpayers – Businesses and Individuals are left trying to figure out how to survive in the aftermath.
BANKRUPTCY – should no longer be associated with the previous negative connotations.
BANKRUPTCY – can provide multiple options and relief to both Businesses and Individuals just trying to get by.
BUT CAN BANKRUPTCY HELP YOU?
A major benefit for the Debtor upon filing bankruptcy is the automatic stay. Once a case is properly filed, the Court places all Creditors on an automatic stay – immediately stopping further collection activity.
What about IRS TAX LIABILITY?
While the IRS may continue to audit tax return during a bankruptcy proceeding, they are prohibited from proceeding with any collection activity – this means that that the IRS is put under an AUTOMATIC STAY to pursue outstanding tax liability.
If the IRS or another CREDITOR violates the automatic stay, action can (and should) be taken immediately.
CAUTION: BANKRUPTCY CAN BE COMPLICATED!!
- Figure out your liability – DO NOT be conservative – this will only hurt you!
- Do research and consult with a reputable bankruptcy and tax attorney – this will help you figure out the type of bankruptcy appropriate for your situation.
- Inform your BANKRUPTCY ATTORNEY and TAX ATTORNEY of both business and personal liability – frequently these liabilities may become intermixed (particularly with small businesses).
- With guidance from your Attorney(s), address your overall objectives and what you wish to obtain via bankruptcy.
- DO NOT be afraid to ask questions!!!
For more in-depth answers concerning tax issues and bankruptcy, see IRS Publication 908