Can Bankruptcy Stop Tax Liens in Arizona?
Owing back taxes can hurt your finances in a very serious way. And the longer that you let those back taxes go, the more severe punishments you can face from the IRS, including jail time. Back taxes could lead you to hire an Arizona bankruptcy attorney as you look for ways to get your finances back in order.
Tax lien impacts on your finances
When the government puts a lien on your home in pursuit of back taxes, it can hurt your credit. Plus, when there’s a lien on your house, you can’t engage in real estate transactions. If you’re struggling financially, this means you can’t sell your home to use its equity to pay off your debts.
Or, you might not be able to rent out your home to earn extra income while you work through your financial struggles.
Perhaps the hardest part of a lien on your home is that it doesn’t necessarily come off your home the minute you pay back the taxes you owe. In fact, the lien could remain on your home for up to 10 years when it will automatically be removed if the IRS does not renew the lien.
You could pay the owed back taxes and file to have the lien removed. Or, if you are unable to pay the taxes immediately, you can post a bond committing to the payment to remove the lien while you make payments.
Click here for an article on eliminating tax debt in bankruptcy.
The tax lien process and its impacts on bankruptcy filings
When an individual owes back taxes, the IRS will send them a Notice and Demand for Payment. At that point, the individual has 10 days to submit that payment before the IRS places the lien on your home.
The lien shows other creditors priority should you file bankruptcy. It’s like the IRS staking its claim to your finances should you file for bankruptcy. If you do file for bankruptcy, back taxes cannot be discharged as part of your bankruptcy filing.
You might be able to pause the collection requests or prevent a lien on your home with bankruptcy, but once you complete your bankruptcy payments, you’ll need to return to making payments on your back-owed taxes.
Debt that is not discharged as a part of Arizona bankruptcy
As you evaluate whether or not bankruptcy might help you with your financial struggles, you should know what is and is not included in your debt discharge when you file for bankruptcy. Several areas of your finances are unaffected by bankruptcy.
One such area of your finances that is not affected with a bankruptcy filing is student loan debt. Only in very rare circumstances are student loans discharged as part of a bankruptcy filing. These cases are generally when an individual becomes disabled and is no longer able to work in such a way that their finances would enable them to make their student loan payments.
In addition to back taxes and student loan debt, Arizona bankruptcy does not mean that you can stop paying spousal support (alimony) or child support. These payments must continue even during your bankruptcy time period.
Bankruptcy can put you more at ease though because it stops the collection calls for personal loans, mortgage payments, car payments and credit card debt. A full financial evaluation can help you determine whether or not bankruptcy is right for you. Find an expert and review your finances to make an informed decision.
When you’re ready to file for bankruptcy, we’ll be the attorney in your corner fighting for the most favorable terms. We’ll handle everything needed for the filing and be your advocate when you need it most.
Find out about student loan debt traps that lead to filing bankruptcy.