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Bankruptcy and Tax Debt

Bankruptcy can help you eliminate a variety of financial problems; however, many people see bankruptcy as just a means to eliminate credit card debt or medical bills. Some see it as a means to stop a home foreclosure or stop an auto repossession. Many others use it as a means to end a wage garnishment.

There are a variety of reasons why people decide to file bankruptcy; however, many people don't understand that a bankruptcy can be a useful tool to help either eliminate tax debt completely in a Chapter 7 or to put the tax debt into a Chapter 13 debt consolidation plan.

For most people, dealing with tax debt is completely different than dealing with your average bill collector. The IRS has a lot of discretion and authority in its ability to seize your property or bank accounts. Our Montgomery, Selma, and Central Alabama bankruptcy attorneys tell each and every client that is facing trouble with the IRS that timing is everything.

First, we explain to our clients that the most important thing to know is that the use of a Chapter 7 bankruptcy or Chapter 13 debt consolidation to manage tax debt is completely different than what we use to manage debt for the arrearage on a home or being behind on your car payments. The interaction of the bankruptcy code with the IRS code can be extremely confusing to people who aren't experienced in such matters. This is why we advise people if you are considering filing a bankruptcy because of tax issues that it is in your best interest to hire an experienced bankruptcy attorney.

Secondly, your taxes must be at least 3 years old or older. This time is measured from the date that the tax return was due for the current tax year.

Also, you have an assessment period of 240 days prior to filing your bankruptcy. This means that the money that you owe to the IRS must be assessed by the IRS by more than eight months. Finally, and perhaps most importantly your tax return must have been filed with the IRS more than two years before the filing of your bankruptcy case.

What we often see is that people want to hire us because they suddenly realize that they owe the IRS a large sum of money, yet their taxes have not been filed for the last 2 or 3 years. In a situation like this the only thing we can do at this point is manage the taxes through a Chapter 13 debt consolidation.

If you have met the above stated criteria it is quite possible that you could use a Chapter 7 to eliminate all of your personal tax debt. You cannot use a Chapter 7 to eliminate any type of sales taxes that you owe on a business that you own or you operate. Many people have a situation where their taxes have been due to the IRS for many years, and the IRS has filed a lien against their property. When this happens the IRS has now created a secured debt which cannot be discharged through a Chapter 7 bankruptcy; however don't despair! We can generally take the debt that is owed to the IRS and put it into a Chapter 13 debt consolidation plan. In this instance, the money that you owe to the IRS can be paid back over a period of 3 to 5 years. If you have met only some of the criteria, but not all, that are needed for a Chapter 7 discharge, then you could possibly use a Chapter 13 to discharge some of the IRS debt, and then pay the non-dischargeable portion of the debt through a Chapter 13 debt consolidation plan.

Our Montgomery, Selma and Central Alabama bankruptcy attorneys know that dealing with the IRS can be very intimidating. When faced with IRS debt call The Sellers Law Firm to get advice on how we can help deal with the IRS. Remember at The Sellers Law Firm all consultations are always free, and we can usually meet with you within 24 hours!  We have four offices in Central Alabama. We are located in Montgomery, Selma, Greenville, and Troy. Call or text us today at 334-LAWYERS (529-9377) and set an appointment to meet our team! Our phone lines are answered 24 hours a day! You may also reach us by using the Contact Form on our website, or by emailing us at! Remember that doing nothing changes nothing so act today!

The Sellers Law Firm is designated a debt relief agency by an Act of Congress and the President of the United States. We have proudly assisted people seeking relief under the U.S. Bankruptcy Code for four decades.

Client Reviews
Brandon was my first choice for an attorney because he is part of the community and you see him at the local store or PTA meetings and he always has time for you and answer your concerns. Ronica Phifer
The Sellers Law Firm represented me in my social security case, and later in my Chapter 7 bankruptcy. I have been very happy with all that you have done for me, and I refer people to you all the time. Thanks for all that you have done for me and my family. Angie Langford
I would like to start out by saying Brandon sellers is more than a lawyer that has helped my family out in numerous occasions but he's also a great friend to our family. Whenever he can't find a resolution for the problem he always recommends somebody that can. I've known him for years grew up together always been really good friends. I like to say in closing I'm really glad I know him I'm glad he's been able to help us when we've needed him. Thanks for everything you've done. Timothy Palmer
The sellers law firm is the best in Alabama they are friendly and very professional from the attorneys to the people in the office. They where very helpful throughout the whole process and even after it was over. So if you are in need for a bankruptcy firm give Brandon sellers a call you won't be disappointed Thank you Again Brian Floyd
I highly recommend Sellers Law Firm, they are fantastic and care about their clients. They walk you through step by step and advise you of your options. Sheila Wright