When outstanding tax debt becomes overwhelming, you should weigh all of your options. There are two main types of bankruptcy you can use to discharge tax debt, but it’s important to work with legal and financial professionals to determine the best course of action for your specific situation.
What is bankruptcy?
Bankruptcy is a legal process that helps you deal with debt you cannot pay off, but it should be considered an option of last-resort since it comes with significant trade-offs and is only available if you meet certain requirements.
Even if you qualify, it’s not an easy fix. Rather, you’re in for a long ordeal that will, hopefully, allow you to satisfy your debts either by liquidating assets or enrolling in a payment plan with creditors.
There are two primary types of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy
In Chapter 7 bankruptcy, a trustee takes control of your assets and tries to sell them to make your creditors whole. You may be allowed to retain some of your assets.
Typically, whatever debt remains would be forgiven. In order to qualify for this type of protection, you need to pass a means test proving that you are
