Back taxes in Oklahoma bankruptcy are dischargeable, but it must meet certain requirements. Filing for bankruptcy in Oklahoma can be a pivotal strategy for individuals grappling with overwhelming financial burdens, including the daunting challenge of back taxes. Navigating the intricate intersection of bankruptcy law and tax obligations requires a nuanced understanding of both state and federal statutes. In certain circumstances, bankruptcy can offer a pathway to discharge some types of tax debts, providing much-needed relief to debtors. However, the ability to eliminate back taxes through bankruptcy is contingent upon various factors. This can mean the type of tax, the age of the tax debt, and the specific bankruptcy chapter filed. It’s a complex area that legal counsel can assess the viability of discharging tax debts and strategize the most effective approach to financial recovery.
Types of Back Taxes in Oklahoma Bankruptcy:
Tax debts are either priority or non-priority. How they classify determines their treatment. A priority tax debt is not dischargeable, either in Chapter 7 or in Chapter 13. In a Chapter 7, they become immediately repayable after the discharge grants and the bankruptcy stay lifts. In Chapter 13, they count with any other priority debts and paid in full through the bankruptcy plan.
Non Priority Taxes in Oklahoma Bankruptcy:
A non-priority debt is like any other unsecure debt. In a Chapter 7, that means it is dischargeable. In a Chapter 13, the tax debt is paid alongside all the other unsecured debts through the plan, and any remaining balance post plan would be dischargeable.
For a tax debt to be non-priority, it must meet several strict conditions. First, it must be income tax. Second, it must have arisen at least three years before the bankruptcy was filed, and the return for that tax year must have been filed at least two years before the bankruptcy. Further, it must receive an assessment by the tax authority at least 240 days before the bankruptcy, or not assessed at all. Finally, there must not have been fraud or willful misconduct in the creation of the tax debt. If a tax meets all those criteria, it is non-priority. Unfortunately, this occurs very, very rarely.
Priority Taxes in Oklahoma Bankruptcy:
Because of this, for debtors with significant tax debt, a Chapter 13 bankruptcy, if feasible, may be a better course of action than a Chapter 7, even if they qualify for a Chapter 7. The first key is that the chapter 13 plan must pass the feasibility test and that’s for another post.
The reason for paying the taxes in a Chapter 13 are a few. That is because the bankruptcy plan takes precedence as a method of payment over whatever the tax authority may want. Therefore, a debtor would have the option of paying out the tax debt over the course of five years, at zero interest. This is to avoid being forced to pay a lump sum, or enter into a payment plan that has an interest rate attached. Any debtor with significant income tax debt should consult with their bankruptcy attorney regarding the best course of action for dealing with tax debts.
Tulsa County Bankruptcy Attorneys
If you’ve reached the end of your rope as it pertains to creditors we care and we can help. If you also have certain tax debt back taxes in Oklahoma Bankruptcy is forgivable. Call our bankruptcy attorneys today at Tulsa County Lawyers Group and find out where you stand. Call (918) 379-4864 and get the legal advice you need.
