CAN CHAPTER 13 STOP THE NY STATE DEPARTMENT OF TAXATION FROM GARNISHING ME?

If you are employed in NYC then you have certainly heard of the NYS Department of Taxation. They are more aggressive than the IRS and will act quickly to ensure you pay your taxes. There is even a new law enacted in NY allowing your license to be revoked if you owe more than $15,000 in tax debt to the State of NY. To deal with this people often enter lengthy payment plans or have their wages garnished. Under these scenarios the interest and penalties can be more than the actual amount owed.

There is some good news for people who owe NYS or the IRS. In chapter 13 Bankruptcy your tax and other debt can be paid back over 36 or 60 months. There is an automatic stay that stops the taxing authorities immediately when a case is filed. In a Chapter 13 case we propose a Chapter 13 payment plan to give you up to 60 months to pay the back taxes without penalty. At the end of your case you will not owe any pre-filing taxes.

Typically, taxes that were supposed to be filed at least 3 years ago and were actually filed at least 2 years ago and have been assessed at least 240 days ago are dischargeable in a chapter 7 or 13. However, if NYS has a tax lien the taxes are considered to be secured tax debt. They are secured by any assets you had when your chapter 13 case was filed. So, if you file a Bankruptcy case and have no assets then the secured debt has nothing to attach to and disappears after your case. If you have a the home and there is a small amount of equity in that home then the NYS tax debt will attach to that equity. This can increase your plan payments in a chapter 13.

Another type of debt is called priority debt. This is debt that does not meet the 3, 2 year and 240 day test. This debt must be paid back in your chapter 13 and will not be discharged in a chapter 7.

Taxes are one of the more complicated areas of Bankruptcy. However, they can be dealt with. My office successfully files many cases to get rid of tax debt each year. If you are in NYC I am happy to meet with you for a free debt relief consultation. Call my office at 212-244-2882 now.

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