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Chapter 7 and taxes

A mountain of debt may feel insurmountable. But many Tennesseans have been able to relieve themselves of large amounts of debt. How? By filing for bankruptcy. Doing so has enabled these Tennesseans to put difficult times behind them so that they can build a new, better financial future. To learn more about one form of bankruptcy - Chapter 7 - keep reading.

Chapter 7 bankruptcy is known as liquidation. It gets that name because a person who files for Chapter 7 bankruptcy will normally have to sell off some of their belongings so that they can use the proceeds to pay off a portion of their debt.

Chapter 7 is available no matter whether the debtor is solvent and no matter the amount of their debt.

But not everyone is eligible to file for Chapter 7. It is limited to people who cannot make consistent monthly payments - among other requirements.

One issue that can come up during the Chapter 7 process is federal tax refunds; specifically, who gets them. The answer depends. A person who files for Chapter 7 bankruptcy can receive their tax refund. But often the process gets delayed or obstructed. For example, in many instances, a bankruptcy trustee will step in and ask for the refund to be used to pay down the debt.

Another issue is whether tax debts get discharged at the end of the Chapter 7 process. It depends. Chapter 7 discharges some kinds of tax debt, but not others. Figuring out which category a particular tax debt belongs to requires analysis of the specific facts in each case.

For more definite answers, Tennesseans may benefit from discussing their situation with an experienced bankruptcy attorney.

Source: irs.gov, "Chapter 7 Bankruptcy - Liquidation Under the Bankruptcy Code," Accessed Oct. 4, 2016

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
Fax: 423-877-0363
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