In a Chapter 13 bankruptcy, you are requesting to make the monthly payments to your creditors with the help of the bankruptcy court. You will have to do his for at least three to five years. Just like the other creditors, the IRS must follow the decisions of the bankruptcy court and is stopped from collecting from you during the duration of your case. However, the IRS is a priority creditor so in a chapter 13 bankruptcy they must be paid in full. If you decide not to file for bankruptcy, you may decide to seek the help of a debt consolidation company to pay off the debts that you have accumulated as an alternative. This is also sometimes referred to as Debt Settlement.
The automatic stay is one of the essential securities that are assured by the bankruptcy process. The automatic stay lawfully stops any creditor, together with the IRS, from collecting on you for repaying the outstanding debts once you file a bankruptcy. However, the automatic stay is only a temporary security until your case is confirmed. In a Chapter 13 bankruptcy, the automatic stay lasts until you receive a bankruptcy discharge or you default in making the repayment detailed in your repayment plan
Offer in Compromise
If your court-determined non-refundable income is not sufficient to repay the IRS in full, you may be able to put forward an offer in compromise to the IRS. Although the IRS can be strict in terms of repayment, if you cannot pay off your tax within a definite time period, you may be able to negotiate your taxes down. The IRS will be paid something and so, may entertain such an offer, but only if it seems doubtful that you will be able to pay off your tax in full.
IRS debt in Chapter 13 bankruptcy
The IRS debt is called a priority debt. This means that the IRS will be paid in a Chapter 13 payment plan before the non-priority creditors like the credit card companies. There are some situations when your credit card companies and the non-priority creditors may actually get nothing in a Chapter 13 payment plan. If your income is only sufficient to pay off your priority claims, then the other creditors may not be paid while the IRS is still paid in full.
Chapter 13 payment plan
Chapter 13 payment plan usually lasts for three or five years based on your annual income that is going for your case. After you meet the terms and conditions of your plan, any outstanding debts that you’ve get discharged by the court and you do not have the liability to pay them off.
Since the IRS is a special creditor, your tax debt need to repaid in full either through direct compromise with the IRS or through repayment in Chapter 13 plan.
If you have additional questions and need to speak to a bankruptcy attorney please contact Symmes Law Group at 206-682-7975.