Which of the two common personal bankruptcy options a Florida resident applies for depends on their circumstances. Chapter 13 is often referred to as a reorganization and serves individuals who continue to earn a livable income but have incurred temporary financial setbacks. Conversely, Chapter 7 is more commonly deemed liquidation bankruptcy whereby essentially all of the qualifying debts are extinguished, and the debtor can restart a new life. However, by statute, certain debts are not typically dischargeable in bankruptcy.
An important threshold issue before filing bankruptcy is to consider what debts are and are not potentially included. While there are certain debts that are dischargeable only without creditor objection, some are strictly disallowed. Within that category, non-dischargeable debts include debts for spousal support, child support or alimony, debts to government agencies for fines or penalties, debts for personal injuries for damage caused due to driving while intoxicated, and others. As a general rule, taxes are not dischargeable.
The first delineation is that payroll taxes are not dischargeable, but income taxes may be. Other circumstances must reflect no misconduct, fraud or deception, and the tax liability must be at least three years old. Additionally, the IRS must have assessed the tax penalty at least 240 days before the debtor filed for bankruptcy. Only if these strict criteria are met will the debtor have the potential opportunity to include his or her tax liability within the bankruptcy proceedings.
Bankruptcy can be a complicated procedure that must adhere to a specific set of federal rules and regulations. Failure to comply can result in a dismissal while not including certain debts can greatly impact the opportunity for a fresh start. An experienced bankruptcy lawyer may provide the guidance and counsel to navigate the often-turbulent bankruptcy seas.