What Happens If You Owe Taxes While Filing for Chapter 13 Bankruptcy?

What Happens If You Owe Taxes While Filing for Chapter 13 Bankruptcy?

Filing for Chapter 13 bankruptcy is a significant step towards financial recovery, but what happens when you owe taxes while navigating this process? In this article, we will explore the implications of owing taxes while filing for Chapter 13 bankruptcy and provide essential insights to help you manage your tax obligations. This article is written by Nicholas J. Del Pizzo, a bankruptcy lawyer in Baltimore, MD.

Are You Required to Pay Taxes While Filing for Chapter 13 Bankruptcy?

In short, yes, you are still required to pay your taxes while in Chapter 13 bankruptcy. Staying current on your tax obligations is crucial throughout your bankruptcy case. This includes filing your tax returns on time and paying any taxes owed by the due date. Additionally, you will need to make regular payments and allocate part or all of your tax returns to your trustee, as specified in your Chapter 13 repayment plan.

Does Tax Debt Go Into Chapter 13 Bankruptcy? 

Yes, tax debts that existed before your Chapter 13 case was filed are included in your repayment plan. However, it's essential to understand that not all tax debts are treated the same in bankruptcy. Some may be classified as priority debts, while others are considered general unsecured debts.

  • Priority Tax Debts: These debts must be paid in full over the course of your Chapter 13 repayment plan. Priority tax debts typically include recent income taxes and certain other tax obligations.
  • General Unsecured Tax Debts: These debts may be paid at a reduced rate, often a fraction of the total amount owed. This allows you to address these tax obligations alongside other general unsecured debts, such as credit card balances or personal loans.

What Happens If You Still Owe Taxes At The End of Chapter 13 Bankruptcy? 

If you still owe taxes at the conclusion of your Chapter 13 repayment plan, it's crucial to understand that these tax debts will not be discharged. In other words, they will not be eliminated, and you will remain liable for paying them. To address any remaining tax debts after your bankruptcy case is completed, it is advisable to work closely with an experienced bankruptcy attorney to develop a comprehensive plan for managing these financial obligations.

Helpful Tips for Managing Your Tax Debt While Filing for Chapter 13 Bankruptcy

To effectively manage your tax debts while navigating Chapter 13 bankruptcy, consider the following strategies:

Modify Your Chapter 13 Plan: 

If necessary, work with your bankruptcy attorney to modify your Chapter 13 plan to include tax debts. This adjustment can be made if the IRS amends its claim.

Consult an Experienced Maryland Bankruptcy Attorney: 

Seek the guidance of a Maryland bankruptcy attorney who possesses expertise in handling tax-related matters. They can help you develop a strategic plan for managing your tax debts within the bankruptcy framework.

Adjust Tax Withholdings: 

Consider adjusting your tax withholdings to minimize the likelihood of owing taxes when your Chapter 13 case is completed. Proper tax planning can help you avoid accumulating additional tax debts.

File All Required Tax Returns: 

To receive a Chapter 13 discharge, it is imperative that you file all outstanding tax returns. Compliance with this requirement is essential to successfully completing your bankruptcy case.

While owing taxes while in Chapter 13 bankruptcy can present challenges, such as navigating tax repayment plans and addressing interest and penalties, these obstacles can be managed effectively with the assistance of an experienced Maryland bankruptcy attorney. By staying informed about your tax obligations and working closely with a legal professional, you can enhance your chances of successfully navigating your Chapter 13 bankruptcy case and emerging with a fresh financial start.

Do You Have Questions Regarding Filing Bankruptcy in Baltimore? Contact The Law Offices of Nicholas J Del Pizzo

Navigating the intersection of bankruptcy and life insurance can be complex and requires the guidance of experienced professionals. At The Law Offices of Nicholas J. Del Pizzo, III, we understand the importance of protecting your life insurance assets while seeking relief from overwhelming debt. Our team of dedicated attorneys has extensive knowledge of bankruptcy laws and can provide tailored advice to ensure that your life insurance is appropriately accounted for during the bankruptcy process. With our expertise and personalized approach, we strive to provide the support and peace of mind you need during this challenging time. Contact A Baltimore Bankruptcy Attorney Today

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