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Waco Texas Bankruptcy Law blog

Bankruptcy and taxes: Can I make my IRS tax debt disappear?

Did you skip paying your taxes for several or more years? Regardless of whether you're an employee or a self-employed business owner, it's easy to fall into a difficult financial circumstance that prevents you from paying your tax bill. Tax obligations like this can really add up over the years, and before you know it, your tax debt can become unaffordable.

Let's take a look at whether you can use Chapter 7 or Chapter 13 bankruptcy as a solution to your tax woes.

Forget morals: Bankruptcy is a business decision

Bankruptcy is a hard pill to swallow in some cases, but it's important to know when it's the right choice. Bankruptcies help people get out of debt and into a balanced financial situation. While they have negative impacts on credit scores, individuals get a fresh start.

Psychologically, bankruptcy takes a toll. Some people feel it's cheating or taking the easy way out. The truth is that bankruptcy isn't the easy way out of debt at all. While the process seems easy, the fact is that you've already been living a difficult life. You've tried and you need help. There's no shame in admitting that you need assistance in handling your finances.

The benefits of a Chapter 13 bankruptcy

When you look at your bank account, does it make you cringe? Do you wonder if you'll have money left over after you get paid? It's tiring to live paycheck to paycheck.

Fortunately, there are various solutions to that problem.One of the things that might work in your case is a Chapter 13 bankruptcy. Since you still work and have the ability to pay down at least some of the debts you owe, this kind of bankruptcy can help you stop treading water and begin to make a serious change in your finances.

Estate planning protects your loved ones and peace of mind

Considering your own death can feel a little morbid. However, avoiding it can lead to a number of issues. For example, if you aren't married, your estate and assets will pass to other family members. If you have minor children, they could inherit your estate. If you haven't taken the time to create an estate plan or last will with guardians for your children, however, your children may not ever see those assets.

Instead of leaving your estate to pass through probate, it makes much more sense to create a detailed and legally sound estate plan and a last will that complies with Texas standards. Doing so protects the people you love and helps ensure that your assets get distributed the way you'd like to them to be.

Understanding what happens to student loans in bankruptcy

Whether you're going through a Chapter 13 reorganization and repayment bankruptcy or a Chapter 7 with discharge of your debts, certain debts won't go away. In particular, typically, student loans don't get discharged in bankruptcy. That can be a source of great frustration, especially because student loans are often one of the biggest sources of debt in people's lives. Even in Chapter 13, where debtors try to repay as much as possible over a specific period of time, student loans likely won't get discharged.

Many young people take out tens of thousands of dollars, sometimes well into six figures, in student loans. They do this with the belief that with more education comes better jobs and higher wages. Sadly, that often just isn't the case anymore. Many graduates with Master's or even doctoral degrees may struggle to find work in their career path. This can lead to financial hopelessness, as the student loans continue accumulating interest while you work a mediocre job with an advanced degree.

Which debts are not dischargeable in Chapter 13?

Declaring bankruptcy offers many people relief from overwhelming and suffocating debt. It is a viable option. With Chapter 13 debts are paid off but at a reduced amount or over a longer period. Depending on your filing and your situation, some debts may even be eliminated.

There are certain debts however which are not discharged with a Chapter 13 bankruptcy filing.

You can reduce your debt and have many options

Maybe you took out your first credit card before college to make sure you'd have money in an emergency or began to use one for its perks when you first got a great-paying job. It doesn't matter when, but if that card has grown to a point of causing you financial strain, it's time to look into debt relief options. There are dozens of methods to eliminate debt from transferring debt to a low-interest card to negotiating with creditors.

Having debt in your life is like paying money into a black hole. If you don't pay more than the minimum, you're charged interest on everything still owed to the company. Miss a payment and fines and fees are added to what you owe.

No, student loan fraud relief shouldn't cost you money

When you're in debt, any sign of freedom is one you grasp with both hands. Unfortunately, that can lead many people to fall victim to scams. There are many so-called debt-relief companies that do not help you and actually push you further into debt.

Some of these companies charge you for debt-relief options you'd have open to you free of charge. For example, some debt-relief scams suggest that they can help you eliminate debt from fraudulent schools. They charge for these services. In reality, you can obtain these same relief options without paying a penny.

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