Financial struggles have a way of compounding. As a result, many people find themselves struggling to pay their taxes. Fortunately, however, Burton Law Offices regularly focuses on eliminating taxes and liens through bankruptcy in California. In fact, bankruptcy court is one of the best ways to deal with these difficult tax situations.
Taxes and Tax Liens
If you don’t pay your taxes on time, the government can put a tax lien on your assets. This means that any valuable property you own can’t be sold without the money going to the governing body that created the lien. It is especially important to handle tax liens before selling property, because mortgage and title companies will pay off liens when you sell it, meaning little money, if any, goes to you.
Tax liens can be created by local, state, and federal entities.
Local Tax Liens
A local tax lien comes from your city, municipality, or county, such as Los Angeles. They often result from failure to pay for water, sewer, garbage collection, or other locality-provided utilities. Even if the service is disconnected or discontinued, an outstanding bill left unpaid can lead to a tax lien. Unpaid city tax, property tax, or special fees can also lead to a tax lien after a period of time dictated by local policy.
State Tax Liens
State tax liens come from state income tax, business taxes, sales tax, motor vehicle tax, and excise taxes left unpaid to the state of California. As a result of not paying these taxes, a lien can be placed on personal property the debtor has, including real estate property.
Federal Tax Lien
The most common federal tax lien comes from unpaid federal income tax. In this situation, the IRS sends notices and allows you to set up a payment plan or pay the lump sum. Other federal tax liens may stem from unpaid gift, inheritance, or real estate taxes. If a debtor fails to pay back their taxes, a lien can be placed on personal property and real estate.
How Bankruptcy Discharges Taxes and Protects Property
Tax liens filed before bankruptcy are considered secured debts, and will be included in the repayment plan of a Chapter 13 bankruptcy. This means that if you have valuable assets, you will repay only the worth of those assets to consider the tax repaid. This is especially helpful if you owe more than the worth of your assets.
In the case of a Chapter 7 bankruptcy, tax liens are handled based on how old they are. Older, discharged liens will not be attached to new property gained after filing bankruptcy. Newer, undischarged liens, on the other hand, will be attached to new property up until the tax lien expires.
With the help of an experienced attorney like Stephen Burton, it is possible to get a tax lien release by filing bankruptcy. Reach out for solutions to your tax debt today.