January 2, 2009, Newsletter Issue #96: Bankruptcy: A Method Of Tax Debt Help

Tip of the Week

After you have exhausted all your other available options with your tax debt, you may be able to gain some tax debt help by filing for bankruptcy.

Once you file for bankruptcy an automatic stay occurs. This protection stops collection efforts by any of your creditors, of which the IRS is the major one. An automatic stay will stop the IRS from issuing a tax lien or from seizing any of your property.

You need to be aware, however, that an automatic stay will only stop the IRS collection process. It will not stop any of the following IRS actions from happening:

Issuance of a tax assessmentDemand for a tax returnAn IRS audit examinationIssuing a tax deficiency notice Demand for an assessment payment Each state does have an exemption amount that is applicable to assets. This is the amount that you can keep to meet your current living expenses. It is important for you to know these exemption amounts. It is for your own protection. For instance, one state may have a $2,500 exemption for your vehicle. This means you can have a car worth $2,500 and not worry about it being seized (levied) by the IRS.

Bankruptcy is a complicated legal issue that is out of the scope of this publication. It is best handled by a tax debt attorney who is knowledgeable in that area.

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