Texas Entrepreneur Beats Two Consecutive Tax Audits Through Strategic Bankruptcy
*To protect client privacy, we use fictional names while sharing real experiences that can help others facing IRS tax debt.*
Business expense disputes
Income underreporting claims
Plus penalties & interest
Immediate protection
Filing Chapter 7 bankruptcy, we instantly halted the IRS's aggressive collection efforts, including wage garnishments and bank levies. By leveraging the bankruptcy code, taxes from specific years older than three years were discharged, transforming recent tax obligations into a structured payment plan under less stringent conditions, thus safeguarding personal assets and securing a financial resurgence free from undue IRS pressure.
Seize entire account
Up to 70% of paycheck
Attach to all assets
Cars, equipment, inventory
Block international travel
Public tax liens
Chapter 7 STOPS all these collection actions immediately!
To determine if your IRS tax debt qualifies for Chapter 7 discharge, we assess the age of the debt, with taxes due at least three years ago potentially eligible. Additionally, your tax returns must have been filed for these debts at least two years before filing for bankruptcy. This evaluation helps us navigate your specific situation towards potential tax debt relief.
Check if your tax debt qualifies for Chapter 7 discharge
In Chapter 7 bankruptcy, we can discharge income tax debts if they meet specific criteria, including the 3-Year, 2-Year, and 240-Day Rules. However, taxes less than three years old, payroll taxes, and debts from tax fraud or willful evasion are not dischargeable. Always ensure your tax returns are filed on time to qualify for potential discharge.
We can explore the Chapter 7 bankruptcy option, which immediately halts collections and can reduce your IRS debt by up to 100% within 4-6 months, with a high success rate and costs between $1,500 and $3,000. Alternatively, an Offer in Compromise might be suitable, though it has a lower approval rate of approximately 20% and costs range from $5,000 to $10,000, potentially reducing your debt during the review period.
| Option | Stops Collections | Reduces Debt | Time Frame | Success Rate | Cost |
|---|---|---|---|---|---|
| Chapter 7 | ✓ Immediately | ✓ Up to 100% | 4-6 months | ✓ High | $1,500-3,000 |
| Offer in Compromise | During review only | Potentially | 6-12 months | ~20% approved | $5,000-10,000 |
| Payment Plan | If approved | ✗ No | 6-10 years | Moderate | Full amount + interest |
| Currently Not Collectible | Temporarily | ✗ No | 1-2 years | Temporary only | Debt continues growing |
| Do Nothing | ✗ No | ✗ No | Indefinite | ✗ None | Seizures & garnishment |
Yes, filing for Chapter 7 bankruptcy can halt IRS collections immediately due to the automatic stay provision. Specifically, income taxes that are at least three years old and for which returns were filed more than two years ago may be discharged. However, taxes assessed within the last 240 days or payroll taxes cannot be eliminated through bankruptcy.
Yes, Chapter 7 can discharge certain IRS tax debts if they meet specific criteria: the tax debt must be at least 3 years old (from the due date), you filed the return at least 2 years ago, and the IRS assessed the tax at least 240 days ago. Income taxes meeting these rules can be completely eliminated. Recent taxes and payroll taxes cannot be discharged but the automatic stay still stops collections.
Yes, filing bankruptcy triggers an automatic stay that stops ALL IRS collection activities immediately - usually within 24 hours. This includes wage garnishments, bank levies, asset seizures, and collection calls. The IRS must stop all collection efforts and can only proceed through the bankruptcy court. This gives you breathing room to resolve your tax issues properly.
While Chapter 7 can discharge the personal liability for qualifying tax debt, existing tax liens may survive bankruptcy. However, the IRS cannot enforce these liens against exempt property (like your Texas homestead), and the lien only attaches to property you owned when it was filed. After discharge, you may be able to negotiate lien removal or reduction since the underlying debt is gone.
You must file all required tax returns before filing bankruptcy. However, we can help you file missing returns quickly. For discharge purposes, returns must be filed at least 2 years before bankruptcy. But even recent returns may qualify if the taxes are old enough. The key is to get returns filed ASAP to start the clock running.
The IRS can still audit returns for years not included in your bankruptcy, but they cannot collect on discharged tax years. Bankruptcy doesn't prevent future audits, but it does eliminate qualifying past tax debts permanently. Many people find they're less likely to be audited after bankruptcy since they're starting fresh with better record-keeping.
Good news for Texans - Texas has no state income tax! If you owe taxes to other states, the same discharge rules generally apply as federal taxes. Sales tax and franchise tax (if you personally guaranteed them) may also be addressed in bankruptcy, though rules vary.
If the IRS is on your heels threatening seizure, filing Chapter 7 bankruptcy can halt their actions within 24 hours. With Herrin Law, you gain the advantage of a former IRS negotiator and the potential to eliminate tax debt, leveraging our expertise to address both recent and old tax issues efficiently. Call (469) 607-8552 today for a free tax debt analysis.
Don't wait for the IRS to empty your bank account or garnish your wages. File Chapter 7 and stop collections in 24 hours.
Not legal advice. Prefer a person? Call (469) 607-8552