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How Personal Bankruptcy Can Help With Spiraling Debt

In this difficult economy, you might be struggling to stay afloat financially. Spiraling debt can land you in an impossible financial situation.

The attorneys at the Law Offices of Craig A. Diehl can help you pursue the right approach for addressing your debt, which might include personal bankruptcy. Our team includes experienced lawyers and CPAs who understand the many nuances of federal bankruptcy law. We provide honest, realistic guidance and diligent representation.

Types Of Personal Bankruptcy

There are two main types of personal (consumer) bankruptcy:

  • Chapter 7, also called liquidation, is a faster, more streamlined bankruptcy that is best suited for those with limited income and assets. There are income limits for this type of bankruptcy.
  • Chapter 13, also called reorganization, is more appropriate for higher-income earners and homeowners. It’s longer and more complicated than Chapter 7, but the end result is the same: eliminating unpayable debt to start with a clean financial slate.

Each case is unique, and choosing the right type of bankruptcy depends on a lot of factors. Our lawyers can help you make that determination.

Finding The Right Debt Solution For Your Situation

Our lawyers won’t push you into bankruptcy. We always consider alternatives such as loan workouts and mortgage modifications. We can negotiate directly with credit card companies and financial institutions on your behalf in an effort to resolve debts outside of bankruptcy.

When you work with our team, you can expect clear and upfront guidance on which approach is most likely to succeed in your situation.

Taxes In Bankruptcy

In difficult financial circumstances, tax liability can put you over the financial edge. Penalties and interest on taxes will cause your tax debt to grow at a fast rate, making it seem impossible to pay off, no matter your intentions. If you’re facing significant tax debts, it might not be necessary to work directly with the IRS or the Pennsylvania Department of Revenue to resolve that debt.

Bankruptcy is a strategic option to resolve some types of tax debts. For example, Chapter 13 bankruptcy can be used to reduce penalties or convert tax liability into unsecured or nonpriority debt, so that it doesn’t have to be paid back in full. Chapter 13 bankruptcy also provides an extended period of time to spread tax payments out over three or five years, which can be very beneficial for cash flow purposes.

Find Out If You Can Resolve Your Tax Issues Through Bankruptcy

Our legal team has extensive experience addressing tax considerations in bankruptcy. With attorneys and CPAs on our team, we are very familiar with all aspects of tax law.

We can evaluate your specific circumstances, including whether liens have been filed and what kinds of taxes are owed. We can then advise you on whether you can discharge your tax debts through bankruptcy.

Our attorneys are highly experienced in handling bankruptcy-related tax issues, including audits, collection efforts and appeals.

Addressing Tax Debts Outside Of Bankruptcy

Not all tax debts can be resolved through bankruptcy. An offer in compromise gives you the opportunity to pay your IRS tax debt at an extremely reduced rate. An offer in compromise is a submission to the government to reduce your overall tax liability to a proposed amount that is calculated through two different components:

  • Budget analysis, which is done by calculating the present value of your surplus monthly income over 65 months
  • Net-worth test or analysis, which is basically a consideration of financial worth

The aggregate of the resulting amounts is what can be offered to resolve your tax liability.

However, the negotiation process can be complicated – it is important that you work with an experienced tax attorney who understands the specific requirements to negotiate an offer in compromise. Our tax lawyers can also help you pursue an offer in compromise with the IRS, if that approach is available and appropriate in your situation. We can also assist in calculating tax debt on the resulting income after an offer in compromise has been accepted.

Discuss Your Bankruptcy And Debt Concerns With Our Team

To discuss your debt-related concerns with the bankruptcy attorneys at the Law Offices of Craig A. Diehl, contact us today or call 717-303-3037. We are conveniently located in Camp Hill, serving clients throughout Cumberland County, Dauphin County and York County.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.