As Tax Day approaches, many people are wondering how they will pay the taxes they owe. Some states and the federal government permit taxpayers to use their credit card to pay taxes. When you file for bankruptcy protection, you typically can discharge or eliminate the majority of your credit card debt. Thus, many people wonder if they pay their taxes with their credit card then file a Chapter 7 or Chapter 13 case, will they be allowed to discharge the tax debt as credit card debt? Unfortunately, it won’t work.
Bankruptcy law provides that it is fraud for an individual to incur debt with the intent to discharge it in bankruptcy. Pursuant to Section 523of the Bankruptcy Code, money obtained by fraud is excluded from being eligible for discharge. This means that if you pay your tax debt with a credit card intending to file bankruptcy, you could be charged with fraudulent behavior. At a minimum, your tax debt will not be discharged and you will remain liable to pay it.
Additionally, in Chapter 7 cases you cannot eliminate debts incurred to pay taxes that would otherwise not be eliminated if you still owed them when you filed. It is possible that you may be able to eliminate them in a Chapter 13 case. Thus, if the tax would not have been discharged in the Chapter 7 case, then the debt incurred by using your credit card to pay it wouldn’t be either.
While most credit card lenders will object to the discharge of tax debt paid on the card, it is important to note that a debt can be held non-dischargeable even if the credit card lender does not file an objection.
If you have questions regarding how your tax debt will be treated in a personal bankruptcy filing, contact DeLadurantey Law Office for an initial consultation.
At DeLadurantey Law Office, LLC, we help businesses and families find their way out of highly difficult financial situations. We provide the advice and guidance you need in obtaining debt relief through bankruptcy and debt negotiations. We can also assist you in defending a foreclosure action. Contact us at 414-377-0518 to discuss how our Milwaukee bankruptcy attorneys can assist you. Like us on Facebook.