Bankruptcy Options

Bankruptcy Can Be The Beginning of Your Financial Restoration!
If you are contemplating filing for bankruptcy to wipe out tax debt, interest and penalties, have a professional thoroughly review your situation prior to filing. In some cases, filing for bankruptcy will leave you with the clean slate necessary to start over. If you don’t qualify to eliminate tax debt through bankruptcy, however, you may find that when all is said and done, you still have a massive tax liability left to deal with.

As you may be aware, there are different types of bankruptcy that you can file for. Each one has a different purpose, outcome, and long-term effect. Determining which type of bankruptcy will be the best for your situation (if any) demands a close examination of your financial situation, assets, debts, and history from every angle. The opportunity of a second chance that bankruptcy offers could be just what you need, but you need to make sure that you have the best chance of success and nothing comes back to haunt you.

Contact us for pre-bankruptcy counseling to help you determine if bankruptcy is the best answer for you.

Before Filing for Bankruptcy, let us review your options with you.

Frequently Asked Questions - Bankruptcy

What is banktruptcy?

Bankruptcy is a federal legal process that provides relief to individuals or businesses unable to repay debts. It is governed by the U.S. Bankruptcy Code (Title 11 of the United States Code).

Bankruptcy may:

  • Eliminate certain debts (discharge)

  • Reorganize debts under court supervision

  • Stop collection activity temporarily

  • Protect certain assets through exemptions

What are the most common types of bankruptcy for individuals?
Chapter 7 – Liquidation

  • Designed for individuals with limited income.

  • Certain non-exempt assets may be sold by a trustee.

  • Many unsecured debts are discharged.

  • Typically completed in 3–6 months.

Chapter 13 – Reorganization

  • For individuals with regular income.

  • Involves a court-approved repayment plan (3–5 years).

  • Allows retention of assets while repaying debts over time.

What is the "automatic stay"?

Upon filing bankruptcy, an automatic stay immediately stops most collection actions, including:

  • Lawsuits

  • Wage garnishments

  • Bank levies

  • Foreclosure proceedings

  • Collection calls

Authority: 11 U.S.C. § 362.

Certain actions (e.g., criminal proceedings, some tax audits) may continue.

Does bankruptcy eliminate all debts?

No.

Commonly dischargeable debts:

  • Credit cards

  • Medical bills

  • Personal loans

  • Certain judgments

Commonly non-dischargeable debts:

  • Recent income taxes

  • Payroll (trust fund) taxes

  • Student loans (except in rare hardship cases)

  • Child support and alimony

  • Certain fraud-based debts

Dischargeability depends on timing and facts.

What is the means test?

The means test determines eligibility for Chapter 7 bankruptcy.

It compares:

  • Your income

  • State median income levels

  • Allowable expenses

If income exceeds thresholds, Chapter 13 may be required.

Authority: 11 U.S.C. § 707(b).

How long does bankruptcy stay on my credit report?

  • Chapter 7: Up to 10 years

  • Chapter 13: Up to 7 years

Credit impact varies based on prior credit condition and post-bankruptcy financial behavior.

When should I consider bankruptcy as an option?

Bankruptcy may be appropriate when:

  • Wage garnishment or levies are ongoing.

  • Total debt exceeds realistic repayment capacity.

  • Multiple creditors are pursuing legal action.

  • IRS collection options are not viable.

  • Financial hardship is long-term rather than temporary.

Bankruptcy should be evaluated as part of a broader financial strategy.

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