Hi. This is attorney Michael Mack, and I’m going to talk truth about bankruptcy. There’s a lot of bad information about bankruptcy out there, and I’m going to talk the truth about bankruptcy, and keep in mind that this presentation is not meant to convince you to file for bankruptcy. Most of my clients avoid bankruptcy. The presentation is simply meant to give you good information that can help you make a decision that’s right for you.
Now, as I said, there’s a lot of bad information about bankruptcy. Even smart attorneys and CPAs often get it wrong, and that’s understandable because the subject of bankruptcy and how it works with the tax code is somewhat complicated. I went to a three-day seminar once and that’s all we studied for three days—how to use bankruptcy to solve a tax problem. So it is a heavy-duty subject. The purpose of this presentation is just to paint in broad strokes for you the possibilities of bankruptcy. If you’d like more details, you can download my free report, and that does provide more details. You can also call me. I’d be happy to speak with you about your unique situation.
Here are some of the possibilities that bankruptcy offers: eliminating all back income taxes completely including penalties and interest, stopping the collection by the IRS, levees, tax-liens that are about to happen, and audits can be stopped—I’ve seen it happen—by filing for bankruptcy. Bankruptcy even has the opportunity to structure a better installment agreement than the one being offered by the IRS. Finally, and this is kind of interesting, you can use bankruptcy without even filing bankruptcy. Within the Internal Revenue manual, there’s a provision which allows the taxpayer or the taxpayer’s professional to use the bankruptcy as leverage to get a deal for the taxpayer without actually filing the bankruptcy. So those are just some of the possibilities that bankruptcy has to offer.
There are two types of bankruptcy that we typically use: Chapter 7 and Chapter 13. Chapter 7 is where no payments are made back to your creditors except the creditors that you choose, such as your mortgage or your car loan. You’re essentially discharging or wiping out your bad debt, including tax debt. The Chapter 7 lasts typically 100 days, maybe 140 days, depending on the type of case. Chapter 13 is a different animal; it does allow more flexibility. You can file a Chapter 13 and then dismiss a Chapter 13. You can use a Chapter 13 to pay back your bad debt in full or in part, depending on the type of debt, the type of tax debt. In most cases for my clients, they’re able to cram down, essentially shrink, the tax debt and pay it back over five years and sometimes in as little as 36 months.
The point of all this again is the possibilities that it may afford you. The one powerful aspect of bankruptcy—both Chapter 7 and Chapter 13—is the injunctive relief that it offers, the instant tax relief that it offers. Upon the filing of a bankruptcy, there’s what’s called the automatic stay. The automatic stay is a declaration—it’s an order—by the federal bankruptcy court for all creditors including the IRS to stop, to cease, and to desist from any further collection efforts.
Now, we use bankruptcy filings through what’s called an electronic filing process. That’s really the only way to go because, theoretically, we can file a bankruptcy at 2 a.m. on Christmas Eve and get instant relief for our clients from a harassing creditor, including the IRS. Now, that typically doesn’t happen, yet it can come in handy.
If you’d like more information on whether bankruptcy can help you or how to solve any tax problem using non-bankruptcy solutions or bankruptcy solutions, I’d be happy to speak with you for free at (414) 771-9200 or at mgm@FaithFirm.com. We take care of our clients. If you become a client of our law firm, we will take care of you. God bless.