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Former teen pop star seeks Chapter 7 bankruptcy relief

There are two primary types of bankruptcy for debtors in the United States. The first is called Chapter 7 bankruptcy. The second is called Chapter 13 bankruptcy. In Chapter 13 bankruptcy the filer's debts are generally reorganized. While the process is often considered less drastic than Chapter 7, Chapter 7 allows filers the opportunity to discharged debt quickly, providing immediate relief to tough financial challenges.

For Tennessee readers unfamiliar with Aaron Carter, the singer and entertainer was a fixture on pop radio stations throughout the early 2000s. While once an international success, it was recently reported that the younger brother of Backstreet Boys singer Nick Carter, is filing for Chapter 7 bankruptcy relief. According to court documents, Carter has claimed just over $8,000 in assets, including a computer and $60 in cash.

A large chunk of Carter's debt involves money that he owes to the Internal Revenue Service. In 2009, the IRS hit the singer with a million dollar lien stemming from a 2003 tax bill. Carter is currently in debt to the IRS in the amount of $1,368,140, with total liability exceeding $2 million. Carter, who was making millions at the ripe young age of 15 is now seeking a fresh financial start through Chapter 7 bankruptcy protection.

While it can be tricky to extinguish tax debt in Chapter 7 bankruptcy, it is possible. Generally a debtor can discharge his or her federal income tax debt in Chapter 7 if there is no fraud or intentional tax evasion and the timing is right. For the timing to be right, the debt must have been due at least three years before the person filed for Chapter 7 relief. Regrettably Chapter 7 does not typically result in a discharge of tax liens.

Source: Forbes, "Not Too Young, Not Too Old: Aaron Carter Hopes For Fresh Start Following Chapter 7 Bankruptcy Filing," Kelly Phillips Erb, Nov. 22, 2013

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