Bankruptcy is a legal status of an insolvent person, that is, one who cannot repay the debts owed to creditors. People can wipe off any kind of debt with bankruptcy, including the IRS debt. There are two main types of personal bankruptcy, chapter 7 and chapter 13. Chapter 7 allows people discharge most of their debts, while chapter 13 provides a court monitored restructure payment plan to clear the debts over a period of 3 to 5 years. Both are viable to clear the IRS debt, depending on your unique financial situation. So for that it is advisable to consult debt attorneys who review the fiscal situation and suggest the best option accordingly.
However, let us have a look at how to file bankruptcy for the IRS debt.
- Firstly, accumulate all your debts and creditor information. Then notify your creditors about a pending bankruptcy petition, if any. You will have to collect all contact information for each creditor and an estimate of how much debt you owe to them. There are three main types of creditors, secured, unsecured, and priority unsecured. Secured debt is a debt that is backed by collateral, like home or equities in home. Unsecured debt is a debt has does not require to be backed by collateral. On the other hand, unsecured priority debt is also an unsecured debt that gives a priority interest, like child support and alimony.
- You may file for bankruptcy hiring the services of a bankruptcy attorney or representing yourself. A bankruptcy attorney can help you make a personal bankruptcy plan and strategy to complete the bankruptcy and discharge the debt. An attorney can also help you decide which personal bankruptcy is suitable for you, reviewing your financial condition.
- Then create your bankruptcy petition either with the help of an attorney or by yourself. Make a list of the IRS debt you have in your bankruptcy plan, but the treatment of your IRS debt will be determined by the IRS court when the court confirms your bankruptcy plan.
- Make sure you complete the terms of the bankruptcy plan in order to receive a discharge. Once your plan is confirmed by the bankruptcy court, complete all the terms of the plan. When all the terms are completed, the court will forgive your debt. That means all debts included in the bankruptcy will be discharged and your bankruptcy will be successful.
In conclusion, if you are under knee-deep IRS debt, follow the above mentioned tips and file bankruptcy in order to wipe off the IRS debt.
