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Considering bankruptcy as debt relief solution

Many Americans struggle with debt. Here in Connecticut, families accrue debt through credit cards, mortgages, medical bills, school loans and more. For some of these households, this debt can quickly come insurmountable. Thankfully, there are a variety of debt relief options available to American families, including filing for bankruptcy protection voluntarily. 

Voluntary bankruptcy is typically divided into two types: Chapter 7 and Chapter 13. Chapter 7 is the most well-known; when an individual files for Chapter 7, all debts deemed allowable by the court can be discharged. In a Chapter 13 solution, some debts can be discharged while others must be paid back under an agreed-upon payment plan. However, it is important to note that, in both cases, tax debt is not typically dischargeble. 

In order for tax debt to be dischargeable, the debt must have been associated with a return that was due at least three years prior to a bankruptcy filing. This debt must have been assessed at least 240 days prior to filing for bankruptcy, and cannot be associated with fraudulent or frivolous returns or the result of an intention to evade tax law. There are also a variety of tax debts that cannot be discharged, including taxes for which an individual did not file a return, as well as many others. 

This can all seem extremely complicated, and especially when it comes to tax debt, it can be. Connecticut residents seeking debt relief through bankruptcy would likely benefit from consulting with an attorney versed in bankruptcy law. The help of such a professional can clarify a complicated process and help to streamline the track back toward financial health. 

Source: Forbes, "Taxes From A To Z (2018): V Is For Voluntary Bankruptcy", Kelly Phillips Erb, April 9, 2018

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