Tax Debts in Bankruptcy

Tax Debts in Bankruptcy2024-03-27T17:06:24-07:00

Phoenix Tax Debt Lawyer

Phoenix tax debt lawyer

The process of seeking tax debt relief in bankruptcy is a complicated matter that requires knowledgeable and experienced legal advocacy. If your tax debt is overwhelming and you are looking to explore your legal options, Wright Law Offices can help.

Contact Wright Law Offices to schedule a free consultation with a Phoenix tax debt lawyer.

Seeking Tax Debt Relief: Exploring Your Options

Eliminating tax debt is not an easy process, and it is not guaranteed in bankruptcy. The federal government has an incentive to make it difficult, as taxes are its main source of income. If you are looking to eliminate tax debt through bankruptcy, there are a few things you should know:

  • The taxes you are looking to discharge through bankruptcy must be of “due and owning” status for more than three years prior to filing.
  • Your taxes must be filed prior to filing bankruptcy.
  • A tax assessment by the Internal Revenue Service (IRS) must be completed 240 days before filing bankruptcy. If you are unsure of whether your tax assessment has been completed, you can order a transcript through the IRS.

Our law firm assists clients with both Chapter 7 and Chapter 13 bankruptcy. Because tax debts are not always dischargeable in
Chapter 7 bankruptcy, a debtor may wish to explore options through
Chapter 13 bankruptcy. In Chapter 13, tax debt can be reorganized and a repayment plan lasting three to five years is established. Our Phoenix bankruptcy attorneys can help determine which — if any — of your tax debts can be eliminated through Chapter 7 and whether a repayment plan through Chapter 13 is a more suitable option.

Contact an Arizona Tax Debt Relief Lawyer

Contact a tax debt relief lawyer at our law offices in Phoenix, Scottsdale, Tempe, Kingman, Avondale or Prescott. Call 480-845-0145 to schedule a free initial consultation.

We are a debt relief agency. We help individuals and businesses file for bankruptcy relief under the Bankruptcy Code.

How a Lawyer Can Help

As a Phoenix, AZ tax debt lawyer knows well, taxes on their own are confusing and stressful. That compounds if you owe money in taxes which you are unable to pay back. Seeing those dollar amounts in black and white can make everything all too real, and it is a common human reaction to want to run away from your problems. Unfortunately, tax debt is not easily avoided and should be addressed with the help of an experienced attorney who can guide you. Learn some of the options available to you to overcome your debt, and then contact a lawyer at Wright Law offices for help immediately.

Apply for Relief

The first step on this journey is to apply for tax debt relief. There are several programs available, and depending on your circumstances you may be eligible for one of them. Many things will go into the consideration of your eligibility such as the total amount of money you make in a year, what assets you own, what kind of job you work at, and more. Be aware, tax debt is never fully forgiven. However, the available programs can lessen the amount that you owe.

One such program from the IRS is called ‘offer in compromise’ which is where you can settle with the government for less than you owe. However, very few people are accepted into this program. It is considered only for those suffering from severe hardships, which is why it is important to have a Phoenix tax debt lawyer by your side to help you know if you qualify for this or if you should focus your energy elsewhere.


If you are not eligible for any assistance programs, an attorney can work to negotiate what you owe with the government to protect your assets. Just like any other type of debt, the IRS can place a lien on your property which means, for example, that if you default on payments they can foreclose on your home in order to make back what they are owed.

A lawyer will work to ensure your assets, such as your home, are protected as much as possible. They will also protect your credit score as much as possible. Any sort of debt will affect it, but there are industry rules that when followed, can protect your score in the long run.

In general, most people qualify for the government’s Fresh Start program which allows you to create a payment plan to slowly pay off your debt at a much more manageable rate. This program is only available to those who have filed all tax returns in the previous years and have not recently taken advantage of the program.

Word of Caution

Tax debt relief is an area where scammers prey upon innocent people. Be vary wary of any programs that promise one hundred percent debt relief. Owing money to the government can be a scary and stressful time — do not let others take advantage of that. Instead, contact a trusted attorney to handle your case.

Reach out to a qualified Phoenix tax debt lawyer at Wright Law offices for help immediately.

If you have text debt, you may want to get in touch with a Phoenix, AZ tax debt lawyer. Not being able to pay tax debt can be stressful. A lawyer from Wright Law Offices can help you find the best solution for your situation.

Here is some further information about tax debt lawyers.

  • Tax debt lawyers are legal professionals who help repair tax issues for individuals and businesses. They can provide a wide range of services, from helping you file back taxes to negotiating a settlement with the IRS.
  • Here are a few different ways that a tax debt lawyer can help you:
    • Assess your tax situation: A Phoenix tax debt lawyer can review your financial records and tax history to determine the extent of your tax debt and the best course of action for resolving it.
    • Handle negotiations with the IRS: A tax debt lawyer can communicate with the IRS on your behalf and negotiate a settlement or payment plan that works for your financial situation.
    • Help you file back taxes: If you have unfiled tax returns, a tax debt lawyer can assist you in preparing and filing them.
    • Represent you in court: In some cases, you may need to go to tax court to resolve your tax debt. A tax debt lawyer can represent you in court and present your case to the judge.
    • Provide advice and guidance: A tax debt lawyer can help you understand your rights and obligations under the tax code and provide advice on how to avoid future tax issues.
  • If you’re facing tax debt, the lawyer you hire should have experience and expertise in this area. Here are some tips for choosing a tax debt lawyer:
    • Look for experience: Make sure the lawyer you choose has experience working with clients who have tax debt issues. You may also want to ask for references from past clients.
    • Check credentials: Look for a lawyer who is licensed to practice law in your state and who has a good standing with the bar association.
    • Evaluate communication skills: It’s important to choose a lawyer who communicates clearly and regularly with you throughout the process.
  • Understand that working with a tax debt lawyer can be expensive, so it’s important to weigh the costs against the potential benefits. However, in many cases, hiring a tax debt lawyer can save you money in the long run by helping you negotiate a lower settlement with the IRS or avoiding future tax issues.
  • Here are some things to consider when it comes to the cost of hiring a tax debt lawyer:

    • Hourly rate: Many tax debt lawyers charge an hourly rate for their services, which can range from several hundred to several thousand dollars per hour.
    • Flat fee: Some tax debt lawyers offer flat-fee services for specific tasks, such as preparing and filing back taxes.
    • Payment plans: Some tax debt lawyers may offer payment plans or other flexible payment options to make their services more affordable.

If you have tax debt, you may want to schedule a meeting with a Phoenix tax debt lawyer from Wright Law Offices.

Five Key Differences Between Chapter 7 and Chapter 13 Bankruptcy

If you are in need of securing tax debt relief, our Phoenix, AZ tax debt lawyer can help you determine the best path forward. When facing financial distress, understanding your options is crucial. Bankruptcy may offer a viable path to regaining financial stability, and if you’re considering bankruptcy in Arizona, you’re likely evaluating Chapters 7 and 13 — the two most common forms. 

Below, we elucidate five key distinctions between them to help clarify which might be the best fit for your situation. If you believe Chapter 7 or Chapter 13 bankruptcy is the right path forward for you or are interested in learning more about the legal avenues for seeking tax debt relief, contact Wright Law Offices today to discover how we can help you.

Type Of Bankruptcy: Liquidation Vs. Reorganization

Chapter 7 bankruptcy is known as a liquidation bankruptcy. It’s designed to eliminate most unsecured debts quickly, often within a few months. In contrast, Chapter 13 is a reorganization bankruptcy, where debtors propose a repayment plan to settle their debts, usually over a three- to five-year period. This fundamental difference sets the stage for how each type of bankruptcy handles your debts and assets.

Handling Of Assets

A primary concern when filing for bankruptcy is whether you’ll be able to keep your property. In Chapter 7, non-exempt assets can be sold off by a trustee to pay creditors, although many assets are protected under state exemption laws. On the other hand, Chapter 13 typically allows you to retain your assets, assuming you continue to make payments according to the plan approved by the court. Our Phoenix tax debt lawyer will consult with you on your assets and how to best protect them and you in the process of filing for Chapter 7 or 13 bankruptcy.

Income Requirements

Eligibility for Chapter 7 requires passing a means test, which compares your income to the median income for a household of your size in Arizona. If your income is too high, Chapter 7 may not be an option. Conversely, Chapter 13 does not have a means test, but it does require that you have a regular income high enough to meet your repayment plan obligations, as well as necessitates that you abide by debt limits set forth in the bankruptcy code.

Duration And Impact On Credit

The time it takes to discharge debts in Chapter 7 is relatively short — typically between four to six months. The brevity of the process means you can begin rebuilding your credit sooner, although the bankruptcy will remain on your credit report for up to 10 years. Chapter 13 takes longer, due to the repayment plan, and it stays on your credit report for seven years from the filing date. However, the commitment to repay some or all of your debts can be seen positively by future creditors.

Dealing With Secured Debts And Liens

Chapter 7 can eliminate your personal liability for secured debts, but it does not remove liens from property, meaning creditors can still repossess secured assets if you don’t keep up with payments. In contrast, Chapter 13 can offer more protection for your assets and may allow for lien stripping or cramdowns, where the amount you owe on certain secured debts can be reduced to the value of the asset. 

Tax Debt Infographic

5 Key Differences Between Chapter 7 And Chapter 13 Bankruptcy Infographic

Obtaining Legal Counsel For The Path Forward

Navigating the process of tax debt relief is seldom straightforward, and when it comes to filing for Chapter 7 or 13 bankruptcy, the counsel of our Phoenix tax debt lawyer becomes indispensable. Certain tax debts may be discharged under Chapter 7, while Chapter 13 could provide a structured repayment approach without the heavy penalties that typically accrue with tax debt.

Phoenix Tax Debt FAQs

Tax debt law can be a daunting process that will likely require the help of our Phoenix, AZ tax debt lawyer. As your trusted advisors in Phoenix, our team of experienced professionals is here to provide you with valuable information about tax debt law. In this article, we’ll address five frequently asked questions related to tax debt, offering clarity and insights to help you make informed decisions regarding your tax matters.

What Is Tax Debt?

Tax debt is the amount of money owed to the government, typically the Internal Revenue Service (IRS), or state tax agencies, due to unpaid taxes. This debt can accumulate from various sources, including income tax, property tax, or business tax liabilities. Tax debt arises when a taxpayer fails to pay the full amount of taxes owed by the designated deadline, leading to penalties and interest charges.

How Does Tax Debt Accrue?

Tax debt can accrue in several ways. One common scenario is underreporting income or failing to report income altogether, resulting in unpaid income tax. Additionally, errors or omissions on tax returns, such as improper deductions or credits, can lead to discrepancies and potential tax debt. Failure to make estimated tax payments, as required for self-employed individuals or businesses, can also contribute to the accumulation of tax debt. Ultimately, any situation in which a taxpayer owes more in taxes than they have paid can lead to the accrual of tax debt.

What Is The Statute Of Limitations For Tax Debt?

The time period within which the government can legally collect unpaid taxes is referred to as the statute of limitations. For federal taxes in the United States, the statute of limitations is typically ten years from the date of assessment. This means that after ten years, the IRS cannot legally collect the outstanding tax debt. However, it’s crucial to note that certain actions, such as filing for bankruptcy or submitting an Offer in Compromise, can extend or pause the statute of limitations.

Can Tax Debt Be Discharged In Bankruptcy?

Tax debt can be discharged in bankruptcy under specific circumstances. Chapter 7 bankruptcy may allow for the discharge of income tax debt if it meets specific criteria, such as being at least three years old, accurately filed on time, and assessed at least 240 days before the bankruptcy filing. However, some tax debts, such as those resulting from fraud or payroll taxes, may not be dischargeable in bankruptcy. Consulting with a Phoenix tax debt lawyer is essential to determine your eligibility and explore your options for tax debt relief through bankruptcy.

What Are The Consequences Of Not Paying Tax Debt?

Failing to pay tax debt can lead to severe consequences. The IRS and state tax agencies have various tools at their disposal to enforce tax collection. These consequences may include wage garnishment, bank levies, tax liens on your property, and the seizure of assets. Additionally, accruing tax debt can result in substantial interest and penalties, significantly increasing the total amount owed over time. Ignoring tax debt can ultimately lead to financial distress, legal issues, and a negative impact on your credit score.

Taking Control Of Your Tax Debt

Tax debt is a complex and serious matter that requires careful consideration and professional guidance. If you find yourself facing tax debt issues in Phoenix, it’s essential to seek the assistance of a qualified Phoenix tax debt lawyer. Our firm is committed to offering our clients with solutions that will assist in regaining financial stability by properly addressing tax debts.

Don’t let tax debt overwhelm you. Contact Wright Law Offices today, and let us help you navigate the complexities of tax debt law. Our experienced team is here to provide you with the guidance and support you need to resolve your tax debt issues and secure a brighter financial future.

Deciding between Chapter 7 and Chapter 13 bankruptcy is a significant decision with long-lasting implications. If you’re wrestling with tax concerns as part of your financial challenges, consulting with a tax debt lawyer should be your next step. We invite you to contact our experienced team at Wright Law Offices to schedule a consultation and start your journey towards financial freedom.

Why should you hire our firm to represent you in bankruptcy?

Great question. Here are a few reasons:

  • 1. Bankruptcy is our sole area of practice. Attorney Wright has over 10 years of experience in the field of bankruptcy and has helped over 1000 people successfully file.
  • 2. Attorney Wright has an accounting background that is useful in analyzing complex financial documents. Prior to law school he obtained a degree in accounting from the University of Wisconsin School of Business. He exercised his strong numerical aptitude in the field of accounting, including several years with The Kohler Co., before ultimately deciding to pursue a law degree.
  • 3. New clients meet with an attorney during their first visit. We understand your time is valuable. It is important your questions are answered quickly and accurately so you can take appropriate steps to secure a better financial future and eliminate fear and stress.
  • 4. In business, referrals are the highest form of professional compliment. We frequently receive referrals from other lawyers and previous clients.
  • 5. Our firm is small which enables us to focus on quality over quantity. We don’t have billboards on the I-10 or banners affixed to public transportation. Our approach is a bit more understated. We care about people and doing things right and it shows in our low employee turnover and positive reviews.
  • 6. Perhaps the most important consideration is the cost of filing bankruptcy. We continuously assess our fees to ensure we offer fair and competitive pricing. We want to offer you a deal without sacrificing the quality of your experience.
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