You Can Still Eliminate Credit Card Debts and Taxes in Chapter 7
Posted by | Posted in Bankruptcy | Posted on 16-02-2010
Contrary to popular understanding, in most cases credit card debts are still dischargeable in bankruptcy without a repayment plan (in a Chapter 7 bankruptcy case). In many cases, tax debts can also be discharged. This is not new information, so why am I writing this? Because not a week goes by that I don’t get a prospective client in my office who tells me they thought that when the bankruptcy laws changed in 2005 (yes, 2005) it eliminated the ability to get rid of credit card debt in a Chapter 7 case (as opposed to a Chapter 13 repayment plan).
This is NOT true. While it was clearly the intent of Congress to appease the credit card lobby and make it more difficult to eliminate credit card debt, the new bankruptcy laws which went into effect in 2005 made filing bankruptcy more complicated, but certainly did not eliminate the ability to do so.
Credit card debts are just as dischargeable as they were for at least 30 years prior to the recent law change. They are not dischargeable if incurred through fraud or other exceptions to discharge (see http://www.bklaw.com/discharge.html for more information on this), but otherwise you can still file a Chapter 7 case (or a chapter 13 or Chapter 11) and eliminate credit card debt.
Income taxes may also me discharged under certain circumstances. The law has not change on this in over 30 years. It is a very complicated analysis, and dischargeability can only be determined after analysis by a professional of ACTUAL internal transcripts from the taxing agency, but the basic rule is that if the taxes are older than 3 years from the date the return was last due to be filed, and the return was filed more than 2 years ago, and not assessed in the last 270 days, then they may be dischargeable. To see more on tax discharge in bankruptcy, visit http://www.bklaw.com/taxes_bankruptcy.html
The bottom line is, don’t believe rumors. Talk to a bankruptcy attorney about your options.
For more interesting bankruptcy myths, visit http://www.bklaw.com/bankruptcy_myths.html
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