Filing and IRS Bankruptcy Guidelines

In its original sense, bankruptcy already has a bad tone and this negativity is increased with the new developments in the laws governing it. For many people, however, this becomes their only bet. Hence, it is important that we comprehend what the concept really is, what the filing requisites and guidelines are and what the process is. The option to refer to a Tampa tax lawyer should not be missed as his services is instrumental in bankruptcy filings.

First, how is bankruptcy defined? It is when a person or business is deemed unable to pay his dues. There are three different forms, or more legally referred to as Chapters, of bankruptcy for individuals, married or domestic partners. Let’s take a glance at each Chapter.

• Chapter 7 – debtors, mostly individuals or couples, are given the time to liquidate their assets to settle their debts and given permission to handle sufficient money to help them redeem their balance in the financial arena.
• Chapter 12 – especially designed for family farmers and fishermen
• Chapter 13 is also named as “debt reorganization.” This is for people who show the ability to settle some or all of their debts. Usually, debtors are given three to five years to pay off their debts.

Business entities can employ the use of Chapters 7, 11 or 15. In the first chapter, businesses are closed as a result of bankruptcy. The 2nd option allows businesses to stay in operation while re-organizing their debts. Chapter 15 focuses more on foreign debt management. To reiterate, the importance of employing the services of a Tampa tax lawyer should not be taken for granted.

What is covered under bankruptcy relief? Credit card debt, medicine bills, and unsecured loans are examples of debt that can be covered. Child or spousal support and some tax debts are not covered.

What are the filing requisites? Again, this is an area where a Tampa tax lawyer can give worthy pieces of information. The bankruptcy provisions were reworked in 2005, making the procedures more complex and challenging for debtors. Written below are some rules and regulations:

• A pile of documents detailing your income as well as expenses is needed to support your filed bankruptcy.
• Debt counseling from pre-approved counseling institutions is needed six months before filing.
• You need to meet income requisites, which should fall somewhere in your state’s median income. Incidentally, this changes from one place to another.

There are two ways in checking if you qualify for Chapter 7:
a. Turn to the US Trustee Program of the Department of Justice
b. Seek advice from a qualified Tampa tax lawyer

Now, the ultimate question is on how to file for bankruptcy. Yes, you can do it by yourself but the fact that this is a legal process implores for the services of a Tampa tax lawyer. Then , after deciding as to which provision you will file under, whether Chapter 7 or 13, you can now file your claim in any bankruptcy court. A trustee, in charge of ensuring you have all the information, is then assigned to you. You will also be obliged to inform your creditors so they will cease in their attempts of collecting payment from you. As your bankruptcy claim is being deliberated, you may be required to confer with your creditors. With all these specific guidelines, it can be seen that filing for bankruptcy is a long process; you are then required to muster sufficient patience to wait it out.

Finally, what is the consequence of a bankruptcy claim to your income taxes or IRS standing? It depends. First, a forgiven debt is considered a taxable income, except in the case of bankruptcy. Second, filing for one shrinks the other tax benefits entitled to a debtor. Third, it generates a bankruptcy estate, which includes all your assets and is considered a separate taxable entity when the claim is filed under Chapter 7 or 11. Consequently you have to pay taxes for this other asset.

The rules and guidelines of bankruptcy can be very daunting. For more information, you can check with the IRS for specific tax inquiries. You should also consult with a Tampa tax lawyer. The choice to file for bankruptcy is a monumental life decision: make sure you are equipped with all the assistance and paperwork you need to make an informed choice.