Bankruptcy Fear #6
I’m worried about back taxes, medical bills and my spouse is worried about what will happen with his/her taxes and credit.
Certain federal, state and local taxes, inheritance taxes, and personal property taxes as well as overly burdensome interest and/or penalties can be mitigated under the bankruptcy laws. There are several qualifications that have to be met, but once these are met, relief is available.
Generally, if the tax is an income tax that was filed on time and was due more than three years ago, you can eliminate the tax debt entirely.
Even if the tax cannot be eliminated, you may be able to pay back the tax over a five-year period. Determining whether or not taxes can be eliminated (discharged) can be tricky, especially if you have had a prior bankruptcy or an offer in compromise.
In cases where both husband and wife have a lot of debt, it makes sense and saves money for you both to file, but it is never a requirement. In fact, many cases, only one spouse files, and if you don’t have any joint debt, your filing will have no direct impact on your spouse’s credit.
As far as medical bills go, almost all unsecured contract debt, including credit cards, personal loans, and medical bills, remain dischargeable in bankruptcy.