Bankruptcy can be a welcome relief, or a depressing episode in your life.  It all depends on your ability to adapt, adjust, and rethink your financial life.

If you are thinking about bankrupting out of Federal Income Taxes, there are a few things to consider.

• Have the tax returns been filed?  Only personal income taxes that have been filed by the taxpayer can qualify to be discharged in bankruptcy.

• Have the taxes been assessed long enough to qualify for discharge in Chapter 7 Bankruptcy?  Generally 1040 taxes that are at least 3 years old and have been assessed for 2 years qualify.  Other federal taxes will probably not qualify, though interest and penalties might.

• Have you filed Chapter 7 Bankruptcy before?  If so, what was the discharge date?  Generally, you can file again after waiting 7 years.

• Does the IRS have liens filed against you?  Do you own real estate?  The liens will survive bankruptcy and the IRS will be waiting for you on discharge.  Bankruptcy will not save your real estate if  a Federal Lien is in place.

• Are taxes the only reason you are considering bankruptcy?  If so, try an Offer in Compromise first as the IRS must take your ability to discharge the taxes in Chapter 7 into consideration.  This often requires an appeal but usually works on appeal.

• Do you owe other significant debt (more than a year's net pay in other debt) besides the taxes you would like to discharge?  If so, you should consider Chapter 7 bankruptcy.  The serious pain would be over in 2 years.  It would probably take you 5-8 years to pay off the other debts and your taxes.  Something to consider.

• Types of Bankruptcy for individuals:  Chapter 7 Liquidation - the only bankruptcy I ever recommend.  Chapter 13 is nothing more than 5 years of payments you cannot make as the trustee, and your attorney  collects handsome fees knowing you will probably have to dismiss out or be dismissed out for missing a payment.  Then you are right back where you started or worse.

Randy