If you are filing chapter 7 bankruptcy you probably have already been informed by your attorney or you already understand that most taxes are not going to be discharged through the bankruptcy process. This means that you will still owed taxes to municipal, state and federal authorities even after successfully completing a chapter 7 bankruptcy in Massachusetts. But, did you also know that your attorney can be very helpful in working with those authorities to lower the total amount of the debt that you will repay?
Attorney as Negotiator
Your bankruptcy attorney should call the appropriate municipal, state or federal taxing authority to which you owe money. Your attorney should also let that authority know the details of your current financial situation, and how that financial situation might look in one, two, or five years. This information should be used by your attorney to inform the tax authority of the likelihood of your making reasonable payments versus being entirely unable to make payments that are too burdensome. Using this tactic, it is very possible that your attorney can negotiate down the current principal, interest, and fees owed as well as those future penalties and interest likely to be arise in future payments. In this way, your bankruptcy attorney should be able to get you put in a position to make lower monthly payments than you would have had you not addressed the issue prior to your bankruptcy case being completed.
Not a Cure All
As I have said in previous articles, Chapter 7 is not a cure all. Filing for chapter 7 bankruptcy in Massachusetts may not remove all debt, but it does remove a substantial amount of debt and typically, all debt. Taxes are the special category that cannot be discharged in Chapter 7 bankruptcy. Since you are going to have to pay it anyway, or face the unpaid portion of tax debt being attached to your property as a lien, you might as well ask your attorney for assistance in negotiating down you debt owed to any taxing authorities.
Consider Your Current Financial Position
Consider where you are financially at the present moment. If you find that filing for bankruptcy under Chapter 7 is your only available option, then consider asking your attorney to negotiate on your behalf in an attempt to lower the amount of money you spend on taxes each month. If you do this prior to filling for Chapter 7, you will have a better picture of what your financial life will look life once the Chapter 7 bankruptcy goes through, as you will know how much money must go to taxes each month.
However, even if you do not choose to file for Chapter 7 bankruptcy, you might consider working with an attorney to lower the amount of taxes that you pay each month. Certainly, there is little harm in trying this approach.
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