Those who have a significant amount of debt may consider using bankruptcy. They want to eliminate their debts or consolidate them into a repayment plan. Top causes for bankruptcy include issues like credit card debt or medical debt.
But what if you owe back taxes? You may be able to use bankruptcy to address some of these taxes—although you can sometimes only discharge taxes that are more than three years old. One option is to use Chapter 13 bankruptcy. It’s important to understand how this process works.
Creating a repayment plan
With Chapter 13 bankruptcy, the goal is generally to consolidate a person’s debt into a monthly repayment plan. They then make payments for the next 3 to 5 years, and those payments are distributed among various creditors. This approach can make outstanding debt more affordable, as the individual may previously have been required to repay most of that debt at the same time. Spreading it out allows them to budget and make those payments.
Are there other options?
If you don’t want to file for bankruptcy or don’t qualify, there are sometimes other options available from the IRS. For instance, if all you’re facing is tax debt, the IRS may allow you to set up a payment plan that you can use without going through the official bankruptcy process. In other cases, the IRS will accept an offer in compromise, allowing you to settle the debt by paying less than you owe.
No matter what tactic you choose, you can see how there are options when facing debt. There are solutions available and ways to create a positive financial future for yourself and your family. Just make sure you know exactly what legal options you have and what steps to take to utilize them.