How can a Chapter 13 help with the taxes I owe?
There are many reasons that Chapter 13s can be a fantastic tool to help people get back on track financially. One reason that a Chapter 13 may be the best option for you is handling your tax debt.
Everyone you owe money to, even if you intend to pay them or the debt is not dischargeable must be included in your Bankruptcy and provided for in your Chapter 13 plan. This includes dischargeable and non-dischargeable tax debt.
If your tax debt meets the criteria for being dischargeable, rather than continuing to pay the debt in addition to the penalties and interest to the taxing agency, when you file Bankruptcy that debt is treated like a credit card and is discharged. That alone is a huge benefit of filing Bankruptcy if you owe taxes. Read more here about whether your tax debt is dischargeable.
So how can a Chapter 13 help differently than a Chapter 7?
Those taxes that are not dischargeable can be paid off through the Chapter 13 plan without continuing to accrue penalties and interest. If you owe taxes, I am sure you are aware of how big of a hit those penalties and interest can be. Not incurring penalties and interest alone can be a huge benefit of filing a Chapter 13.
In a Chapter 13 you are not only going to setup a payment plan that can address the tax issue without penalties and interest, you are also going to setup a plan that will address all of your other debts simultaneously. This could mean cramming down your car to pay it off for what it is worth, or even getting rid of a second mortgage.
Chapter 13s can be a fantastic tool, and may be a great option for addressing your debts, protecting your assets and paying off your taxes.