Filing Bankruptcy to Get Rid of Tax Liens in Tennessee

Filing for bankruptcy can be a viable option for individuals facing overwhelming debt in Tennessee, including tax liens. A tax lien occurs when the government places a legal claim on an individual’s property due to unpaid taxes. This can lead to significant financial stress and can impact your ability to secure loans or buy a home. Understanding how bankruptcy can help eliminate tax liens is crucial for those looking to regain their financial stability.

Tennessee allows individuals to file for Chapter 7 or Chapter 13 bankruptcy, both of which can provide relief from tax-related debts. Chapter 7 bankruptcy is often referred to as liquidation bankruptcy because it involves selling off non-exempt assets to pay creditors. On the other hand, Chapter 13 bankruptcy involves creating a repayment plan to pay off debts over three to five years.

One of the most significant advantages of filing bankruptcy in Tennessee is that it can temporarily stop the collection of tax liens through an automatic stay. This immediate relief can prevent further collection actions such as wage garnishments or bank levies. However, it’s important to note that bankruptcy may not eliminate all types of tax debts. Income tax debts that are over three years old, filed timely, and meet specific criteria can be discharged through bankruptcy.

In Tennessee, to successfully discharge tax debts in bankruptcy, the following conditions generally need to be met:

• The tax return must have been filed at least two years prior to filing for bankruptcy.
• The tax must be assessed at least 240 days before filing bankruptcy.
• The tax return must not be fraudulent or filed with the intent to evade tax.

Once bankruptcy is filed, the process of eliminating tax liens can begin, but this typically requires careful planning and legal assistance. It’s advisable to consult with a bankruptcy attorney who can help navigate the complexities of IRS tax laws, as well as evaluate your specific circumstances regarding tax liabilities. An experienced lawyer can assist in assessing whether Chapter 7 or Chapter 13 is the best route for you based on the nature of your tax debts, your income, and your overall financial situation.

Furthermore, while bankruptcy can eliminate many unsecured debts, tax liens can remain attached to any property unless they are specifically addressed during the bankruptcy proceedings. To remove a tax lien, you may need to negotiate with the IRS or wait until the debt is discharged and the lien can be released. This process can be complicated, and having a knowledgeable attorney to represent your interests can be invaluable.

In summary, filing for bankruptcy in Tennessee can be a strategic way to alleviate the burden of tax liens and related debts. With the potential to eliminate qualifying tax debts and halt collection actions through an automatic stay, bankruptcy may provide a fresh start. However, seeking professional legal advice is critical to navigate the process and ensure you meet all necessary legal requirements for discharging tax liabilities.