We look at the filing of a bankruptcy petition as a last, yet most effective option to stop a foreclosure or eviction, stop a wage garnishment, save a vehicle from repossession or even to keep the lights on and heat working. The filing will have an impact on your credit, it will appear on your credit report and you may have a more difficult time obtaining credit for a short time. However, once you emerge from your bankruptcy with your fresh start in hand the temporary trade-off will be worth it.

Although every case is different, generally the Internal Revenue Service is treated just as other creditors are treated in a bankruptcy case. The moment you file your bankruptcy petition you are protected from all collection actions including actions by the IRS. 11 USC § 362(a). This means a bank account levy or wage garnishment, even if initiated by the IRS, is stopped once the bankruptcy petition is filed, just like that!

As to the dischargeable of the tax debt, the general rule as to income taxes only (as this is a general rule it may or may not apply to your situation) is if three years has passed since the tax due date and the tax return has been in the IRS possession for two years or more the tax debt may be forgivable or dischargeable even in a Chapter 7 case. The same rules apply to income tax debts owed to the New Jersey Division of Taxation as well however there are exceptions to the rule and you should call us if you are facing tax debt issues.

The short answer is YES!

The filing of a bankruptcy petition stays (that’s the legal term used in 11 USC § 362(a)) or stops all collection actions. We can even file a bankruptcy petition the day of the Sheriff Sale and stop the sale (although we prefer you see us earlier).

Once the petition is filed we will work with you to create an affordable plan to pay your mortgage company to save your home or suggest a loan modification, so-called loss mitigation options, possibly even assist you to sell or refinance your home. The filing of the Bankruptcy petition is so important because it stops the foreclosure and even the Sheriff Sale so we will have time to work together to discuss which strategy works best for you.