Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. This is one way of dealing with debts you cannot pay. It is a legal procedure that may help you eliminate your tax debt. A decision to file for bankruptcy is a serious step. One of the main reasons Debtors file, is to get rid of "Unsecured Debt. At its most basic, this is a federal legal proceeding that gives people who need to get out of debt and are unable to pay their bills the right to start again financially. It is governed by the federal law found in Title 11 of the United States Bankruptcy Code. Lawyers can analyze your complete financial situation and then let you know whether this is an option for you. It is listed in the top 5 life-altering negative events that we can go through, along with divorce, severe illness, disability, and loss of a loved one.

One aspect is that you must have filed your last 4 years tax returns before your case can go before the creditors' meeting. Though this is a federal law, your particular state of domicile can impact the advice you receive. It is not the same in every state.Probably the main reason most people prefer Chapter 7 bankruptcy is that it doesn't require you to repay any portion of your debts, as Chapter 13 does. Chapter 7 is the liquidation variety -- property is sold(liquidated) to pay off as much of your debt as possible, while leaving you with enough property to make a fresh start. However, although it is more expensive, a Chapter 7 "fresh start" is still available to most people. Liquidation bankruptcy is called Chapter 7, and it can be filed by individuals (a "consumer" Chapter 7) or businesses . A typical Chapter 7 case is opened and closed within three to six months, and the person filing emerges debt-free except for a mortgage, car payments, and certain types of debts that survive, such as student loans, recent taxes, and unpaid child support. Although you can lose property in Chapter 7, most filers don't.

Chapter 11 gives the debtor a fresh start, subject to the debtor's fulfillment of its obligations under its plan of reorganization. Chapter 11 is used for debts in excess of $1 million and is used mainly by businesses. Chapter 11 is very similar to Chapter 13.

Chapter 13 is also known as "wage earner" because, in order to file for Chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt. Chapter 13 is available to debtors with regular income. Chapter 13 is used for debts under $1 million and is used mainly by consumers. Filing your Tax Returns with the IRS after you have filed your Chapter 13, it is still important for you to file your income taxes with the IRS. Once bankruptcy is filed, all the property of the debtor at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate.