Myth: I can get rid of my tax debt through a bankruptcy discharge.
Truth: Income tax debt is generally not dischargeable in bankruptcy unless:
- The debt is 3 years or older, and
- You filed your tax return on time with no amendments
Myth: I can spend as much money as possible and drive up my credit cards because I know that I’m going to file for bankruptcy.
Truth: If the bankruptcy trustee finds that you have done the aforementioned, you will be found as fraudulent (trying to defraud the system), in which case they may order you to find ways to pay off your creditors and/or deny your bankruptcy discharge.
Myth: I can file for bankruptcy as long as I have a lot of debt, and no matter how much money I have saved up—nor how much income I make—I won't have to pay my creditors.
Truth: If you have a substantial amount of money saved up, your bankruptcy Trustee may request that you use some or all of that money to pay your creditors. Only a certain amount of money is exempt in bankruptcy. Secondly, you must qualify to file for bankruptcy. A means test is used to determine whether you qualify based on your income and the income of your spouse, as well as the number of dependents in your household. Even if your spouse is not filing with you, their income is taken into account.
If you’re considering bankruptcy, please call Sharnae Smith at Smith Legal Services for your free 20 minute consultation. Please visit www.mysmithlegal.com or give us a call at 240-245-0015 to speak with someone directly.