Missouri Bankruptcy Laws and IRS Debt

Understanding Missouri bankruptcy laws is crucial for anyone considering filing for bankruptcy, especially if they are dealing with IRS debt. Bankruptcy is a legal process that helps individuals or businesses eliminate or repay their debts. In Missouri, the two most common types of bankruptcy filed by individuals are Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," allows individuals to discharge most of their unsecured debts, which might include credit card debt, medical bills, and certain tax debts. However, not all IRS debts can be discharged in a Chapter 7 filing. For instance, if the tax debt is less than three years old, it generally cannot be eliminated through bankruptcy.

In contrast, Chapter 13 bankruptcy, also known as a "wage earner's plan," enables individuals to create a repayment plan to pay back all or part of their debts over a period of three to five years. This option can be beneficial for individuals with substantial IRS debts, as it allows them to include tax debts in the repayment plan. Moreover, Chapter 13 may provide some relief from the collection efforts of the IRS, allowing filers to catch up on unpaid taxes over time.

It is important to note that not all personal income tax debts can be eliminated through bankruptcy. To qualify for the discharge of a tax debt under either Chapter 7 or Chapter 13, certain criteria must be met:

• The tax must be income tax (other types of tax debts, like payroll taxes, can't be discharged).
• The tax return must have been filed at least two years before the date of filing for bankruptcy.
• The tax must have been assessed by the IRS at least 240 days prior to filing for bankruptcy.
• The tax return must not be fraudulent, and the taxpayer must not have evaded tax responsibility.

Missouri has its own set of exemptions that may apply during bankruptcy proceedings. These exemptions can protect certain assets from being sold to repay creditors. In Missouri, individuals may choose between state and federal exemptions, depending on which benefits them most. Common exemptions include equity in a home, personal property, and retirement accounts.

Consulting with a bankruptcy attorney familiar with Missouri bankruptcy laws is vital for anyone facing IRS debt. An experienced attorney can provide personalized guidance, help navigate the complexities of the filing process, and ensure that all paperwork is completed correctly.

A valid bankruptcy filing generally puts an automatic stay in place, which halts most collection actions from creditors, including the IRS. This stay provides necessary relief and allows debtors to reorganize their finances without the threat of immediate collection actions.

In summary, Missouri bankruptcy laws offer individuals struggling with IRS debt several options for debt relief. Whether one opts for Chapter 7 or Chapter 13, it is essential to understand the eligibility criteria for discharging tax obligations and to seek professional legal assistance to navigate this complex area of law effectively.