When tax debt goes unpaid, the government has the power to seize wages, bank accounts, and even property. A tax levy can be financially devastating, making it difficult to pay for basic living expenses. Many people feel trapped, unsure of how to stop aggressive collection efforts.
Fortunately, there are legal options to regain control. Bankruptcy can provide relief from tax levies by stopping collection actions and, in some cases, eliminating tax debt altogether. As a bankruptcy law firm, we help individuals file for bankruptcy relief in Texas, offering strategies to protect assets and achieve a fresh start.
This article will explain how tax levies and bankruptcy are connected, when tax debt can be discharged, and how filing for bankruptcy can stop tax levies.
How Bankruptcy Stops a Tax Levy
A tax levy doesn’t happen overnight. The IRS or Texas state authorities must follow a process before seizing assets. However, once a levy is in place, stopping it can be difficult—unless bankruptcy is an option.
When you file for bankruptcy, an automatic stay is immediately put in place. This legal protection stops all collection efforts, including:
- Bank account levies
- Property seizures
- Tax refund offsets
- Threats of further enforcement actions
The automatic stay remains in effect throughout the bankruptcy process, giving us time to determine the best way to handle outstanding tax debt.
When Can Tax Debt Be Discharged?
While some tax debts must still be paid after bankruptcy, others may be eliminated if they meet specific requirements. To qualify for discharge, tax debt must:
- Be at least three years oldfrom the date the return was due.
- Have been filed at least two yearsbefore bankruptcy.
- Have been assessed by the IRS at least 240 daysbefore filing.
- Not involve fraudulent returns or intentional tax evasion.
If these conditions are met, a Chapter 7 bankruptcy attorney can help eliminate qualifying tax debt entirely. If not, a Chapter 13 bankruptcy attorney may help create an affordable repayment plan to stop levies and protect assets.
Discover the difference between Chapter 7 and Chapter 13 bankruptcies! Please link to LSA 2.
Recent Legal Updates Affecting Tax Levies and Bankruptcy
Changes in tax laws and court rulings can impact how bankruptcy affects tax levies. For example:
- IRS Collection Standards:Recent adjustments have increased allowable expenses, making Chapter 13 repayment plans more manageable for those with tax debt.
- Tax Lien vs. Tax Levy:While bankruptcy can stop levies, pre-existing tax liens may remain on certain assets. Understanding the difference is essential when deciding how to proceed.
- Court Rulings on Tax Dischargeability:Courts continue refining how tax debt is treated in bankruptcy, with some rulings favoring debtors who have made an effort to comply with tax laws.
Staying informed about these updates is key when considering bankruptcy for relief from tax levies.
Stop the Stress—Find the Right Solution
What if you could stop a tax levy today? If you’re struggling with aggressive collection efforts, filing for bankruptcy relief may be the solution. At the Law Office of Joel Gonzalez, we provide the legal guidance needed to protect assets and move forward with confidence.
Contact us by calling at (361) 654-DEBT for a consultation with a bankruptcy lawyer in Corpus Christi who understands how to handle tax levies and bankruptcy effectively.
