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Tax Debt

Tax debt and bankruptcy attorney John Ioakimidis has helped people get out of debt throughout Chicago, Cook County, DuPage County, McHenry County, Will County, Kane County, and Lake County for over 25 years.  

Problems with the IRS are something most taxpayers go out of their way to avoid. Unfortunately, ignoring issues concerning tax withholding or taxes owed from prior years can result in fines, penalties, interest charges, and massive tax debts. Additionally, continued neglect of your tax situation can also lead to criminal prosecution by the United States Department of Justice. Dealing with the IRS and their clever agents requires excellent skill and a game plan if you want to be free from the weight of the Internal Revenue Service. 

As a Chicago tax debt and bankruptcy attorney with over 25 years of experience representing people in northern Illinois and throughout Cook, Will, Lake, McHenry, Kane, and DuPage Counties, I fight for the rights of those who owe the IRS money. Nothing is as effective as filing for bankruptcy to tame the IRS. The filing of Chapter 7 or Chapter 13 bankruptcy stops IRS collection efforts immediately. In Chapter 7 bankruptcy, you can erase certain past tax debts. In Chapter 13, you can erase certain past taxes and force the IRS into a repayment plan over 60 months for taxes that you cannot erase - interest and penalty-free. 

Protecting You Against Tax Collection Efforts

If you owe money to the Internal Revenue Service (IRS), you will receive a notice that includes the total amount of taxes you owe, any interest fees and penalties, and a request to pay the amount in full by a certain date. Failing to respond to these notices will result in additional collection actions, including the use of liens, which prevent you from selling or trading property until your tax debt is settled, and levies, which can result in the actual seizure of your personal property or assets. Items that may be seized to satisfy a tax debt include the following:

Income and wages;

Financial accounts;

Real estate, homes, land, and rental properties;

Cars, motorcycles, boats, and recreational vehicles;

Personal property, such as art, jewelry, or collectibles;

Business holdings, including inventory and displays.

To protect yourself against these actions, it is essential to respond to the IRS promptly and cooperate with the assigned IRS agent. Unfortunately, without the protection of bankruptcy, the IRS dictates what will happen to your tax debt. You have very little control, and your future is dependent on the IRS agent assigned to you.  

Filing for bankruptcy levels the field so you can deal with the IRS tax debt along with your other debts. In many cases, the tax debt will be erased or reduced depending on the type of bankruptcy you qualify for under the Bankruptcy Code. Unlike any other approach to resolving tax debt, bankruptcy gives you the legal power under federal bankruptcy law to permanently erase certain past tax debts and propose a Court-approved plan to repay tax debt that cannot be erased. By far, filing for bankruptcy with the help of a seasoned bankruptcy lawyer is the most effective way of reducing or eliminating your tax debt and preventing the loss of your income and property.

Reducing Tax Debts Through Bankruptcy

Allowing your text debts to linger on will not only lead to levies and garnishments from the IRS or the Illinois Department of Revenue but will also seriously damage your credit score. The Illinois Department of Revenue has been known to be even more aggressive than the IRS with their collection efforts. At some point, you must draw a clear line in the sand and start over. The type and amount of debt, the circumstances under which you incurred the debt, your income, and your overall economic situation determines which Chapter under the Bankruptcy Code you can qualify.

-In a Chapter 7 Bankruptcy, you erase most of your unsecured debts and still get to keep most of your essential personal property. You can keep your home and car in certain circumstances if you continue to make the payments to your lenders. In most Chapter 7 cases, most people want a new or fresh start. That means that you can start rebuilding your credit after your bankruptcy and move on with your new financial life. With proper guidance, you can rebuild your credit and have access to credit soon after your bankruptcy completes. 

-In a Chapter 13 Bankruptcy, you propose a Court-approved repayment plan to erase some and restructure other debts in a way that makes it more affordable to keep your property and make your payments. The plan is based on your earnings and can last up to 60 months. The idea in a Chapter 13 bankruptcy is to keep your property and make it more affordable to keep it after the bankruptcy. 

For over 25 years, as a bankruptcy lawyer, I have helped hundreds of clients find the right path to financial independence. The burden of debt is often crushing - especially if the IRS is also one of your creditors. You have many consumer and due process rights under State and Federal law, so do not give up!

Are there particular rules for taxes in bankruptcy?

Yes, not all taxes can be erased. The specific mechanical rules can be found at 11 USC §§ 523(a)(1) and 507(a)(8). Generally, they provide that for taxes to be discharged/erased, they must meet the following three-part test:

  1. Three years have passed since the tax return was due, including extensions;
  1. The tax return must have been filed more than two years earlier than the bankruptcy filing, and
  1. The tax debt was assessed by the IRS more than 240 before the bankruptcy filing. 

If the IRS has filed "substitute returns" for you because you have not filed your income returns, that is not sufficient to discharge the debt. You must file your returns and comply with the above three-part test if you want your taxes to be erased. Further, under 11 USC § 523(a)(1), any fraud or attempt to evade or defeat a tax cannot be erased. Aside from income taxes, certain taxes like payroll taxes and sales taxes are not dischargeable in a Chapter 7 bankruptcy. However, non-dischargeable taxes can be reorganized in a Chapter 13 bankruptcy to be paid over five years or less. 

Award-Winning Legal Representation from a Bankruptcy Attorney You Can Trust

If you have tax debt and face the threat of IRS liens or seizures, contact me to discuss the available options. Your tax debt is not a death sentence and can be managed, erased, or reorganized within the context of bankruptcy. As an award-winning Chicago area bankruptcy attorney with over 25 years of experience in the field, I provide the professional representation you require to ensure that you are protected. It is imperative that a game plan be put into action to deal with your tax debt and get your finances in order. I have advised clients throughout northern Illinois, including Cook County, Lake County, Kane County, McHenry County, Will County, and DuPage County. I can advise you on the options available to help avoid IRS collection actions. Call me at 312-229-5500 or contact me online to request your free consultation today. 

Contact Me Today

I'm committed to helping you get out of debt and starting a new life. If you live in Chicago, Cook County, Lake County, DuPage County, Kane County, McHenry County, or Will County, contact me for a free consultation over the phone, in person, or video call.

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