A few words on taxes in bankruptcy...

I have practiced bankruptcy law in the Northern Kentucky / Cincinnati area for nearly fourteen years.  My office has handled cases across a broad spectrum of businesses and personal situations.  An emerging trend that is far more prevalent now than ever before is the use of aggressive collection tactics by tax authorities.  I have seen more swift collection activity from the IRS, Kentucky Revenue Department and Ohio Attorney General than ever before.

Most of the clients that I talk with about tax problems in a bankruptcy context are surprised to hear that bankruptcy does offer a wide variety of remedies for tax debts.  The first and most important question is when a tax return was filed.  (If returns have not been filed then FILE THEM NOW!!!)  Filing tax returns is critical and most of the Bankruptcy Code is written to penalize people or corporations that do not file returns.

Chapter 7, depending upon the situation, can be used to discharge old tax debts and/or the liquidation process can pay off or decrease tax liabilities.  Chapter 13 gives a very wide variety of treatments for tax debts that often result in a better situation than an offer and compromise with the tax entity can give.

So, the bottom line is that if your tax issues are causing you to have serious problems then do not assume that bankruptcy is of no use to you.  The fact is that bankruptcy may actually be the best option for resolving tax problems.