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Tuscaloosa Student Loan Bankruptcy and Tax Debt Relief Lawyer
In August 2022, President Biden announced a nationwide Student Loan Forgiveness plan. This plan will forgive up to $20,000 of student loans per borrower, if they meet the criteria. Still, many Americans may not qualify or they may have thousands of dollars of student loans left to pay off. While bankruptcy can’t fully discharge federal student loans and past taxes, you can still reorganize these debts using bankruptcy. At Eric M. Wilson, LLC, we use our experience and in-depth knowledge to help you find the right solution to manage student loans and tax debts in filing bankruptcy. We work individually with clients throughout the Tuscaloosa, Alabama, area to help them achieve the debt relief they need. For more information about student loan bankruptcy, call 205-349-1280 today.
Student Loan Bankruptcy
It’s almost impossible to discharge federal government-issued student loans through bankruptcy. You must prove that you suffered undue hardship or that continuing to make student loan payments would cause undue hardship.
By filing Chapter 7 or Chapter 13 bankruptcy, however, you can get rid of other debt obligations in order to continue paying back student debts. Depending on your state, sometimes you may even be able to make payments on student loans during your bankruptcy case.
Private student loan obligations are subject to possible discharge without having to establish undue hardship. But this is only the case if you can prove that they aren’t protected under the Bankruptcy Code. Additionally, you must verify your private loan. You can do this by comparing your credit report against the DoE. According to Section 523(a)(8) of the Bankruptcy Code, bankruptcy can discharge a student loan if you can prove that you have made good faith repayment efforts. Also, if your financial situation doesn’t allow you to have a minimal standard of living while paying off your student loans, you could have them discharged. But, if you can prove the loan wasn’t backed by a nonprofit, it exceeded your cost of attendance, and/or it wasn’t a conditional grant sum, you might be able to discharge student loans from private lenders (Example cases: Homaidan v Sallie Mae, Inc., McDaniel v. Navient Solutions, and Crocker v. Navient Solutions).
Eric Wilson Law LLC is a debt relief agency. That means that an experienced federal student loan lawyer can review your student loans situation, your bankruptcy case, and any other financial hardship you’re enduring. Then, they can advise you on the debt relief strategy that best fits your unique circumstances.
How is Undue Hardship Determined?
The definition of undue hardship can vary from person to person. So the bankruptcy court often uses the Brunner test to determine if you have already suffered or would suffer if you were required to repay your student loans. The Brunner Test can prove undue hardship through the following questions:
- Is it possible for you to maintain a minimal standard of living if you had to keep paying off your student loans?
- Are your financial problems temporary, or do you think they’ll continue for the next several years?
- Have you made a good faith effort to improve your financial problems and stay up to date with your monthly expenses before undergoing the bankruptcy process?
If the bankruptcy court rules in your favor, your federal government loans might be fully or partially discharged. You could also potentially have your terms altered, for example, to a lower interest rate.
Keep in mind that it is tough to win student loan discharge in general. Also, the bankruptcy court is unlikely to pursue your best interests and will only help you with the bare minimum. If your loans aren’t discharged, and yet you still can’t make payments, you should make sure you are evaluating all of the different repayment plan options, such as switching to a different plan. You can speak with your loan servicer for more information on options and their details.
What Alternatives Do I Have for Student Loan Bankruptcy?
Approximately 250,000 student-loan debtors go through a bankruptcy filing. But, instead of filing for bankruptcy, you can also choose one of the following debt relief options.
- Income-Driven Repayment Plans (IDR) is a great option for federal student loans, not private student loans. Through the IDR plan, your monthly payments can become more manageable based on your monthly discretionary income. Once you have followed this plan for 20 to 25 years, your loans are potentially forgivable.
- Forbearance or Deferment: If you need a temporary pause on your student loan payments, deferment and forbearance may be good options for you. If you choose the deferment route, you may be able to avoid interest payments depending on the type of loan you have. Meanwhile, if you choose the forbearance route, you’ll stay have to pay interest on your loans.
- Debt Consolidation: This would allow you to group debts together for preferably a lower interest rate or monthly payment. Essentially, it is a better management plan. But if you have a low credit score due to your debt or if you lack a cosigner, you may not be able to choose this option. However, you could still undergo debt consolidation through a nonprofit credit counseling agency. If you choose this route, the agency could erase your debts within three to five years.
Eliminating Tax Debt In Chapter 13 Bankruptcy
Bankruptcy can discharge some tax debts. You can even repay some tax debt through Chapter 13 bankruptcy with no more accumulating penalties or interest. Bankruptcy can stop all tax levies once you file your petition. But bankruptcy can’t eliminate a federal tax lien if the IRS is already on your property before you filed your petition. Note that if you clarify the IRS as one of your creditors in your bankruptcy case, they will be notified. Call Eric M. Wilson, LLC to determine which tax resolution methods might best serve you. The IRS also offers tax resolution options through payment plans and Offer In Compromise (OICs).
Our tax lawyers can work with the IRS and other creditors to develop a plan that works within your budget. In some complex tax debt cases, we work directly with experienced accountants to develop the best possible solution for you. Our goal is to help you obtain debt relief in the most efficient and effective manner possible.
How Can Chapter 13 Bankruptcy Help Manage Tax Debt?
You can discharge tax debt from income taxes, but not payroll taxes or fraud penalties. Chapter 13 bankruptcy helps by eliminating or minimizing tax liabilities. Generally, taxes that are more than three years old can be forgiven depending on your disposable monthly income. Dischargeable tax debt won’t incur interest or penalties, but nondischargeable tax liability might. You must pay off non-dischargeable taxes within the next three to five years. You can take care of tax liens through Chapter 13 bankruptcy filings as well.
If the income tax debt is over 240 days old, that means the IRS did not uphold the “240-day rule” where they are supposed to assess IRS tax debt 240 days prior to your bankruptcy filing. Filing late can indicate expired extensions. The IRS will follow this with a substitute return.
Be sure to provide all of your tax returns before you file for Chapter 13 bankruptcy, or you might experience the following situations.
- A bankruptcy trustee might put forth a motion with a small timeframe for you to turn in your tax returns. Missing that deadline will result in a case dismissal, with no chance to plead.
- If you don’t provide all of your tax returns within the acceptable timeframe, the IRS might proceed with a “best estimate,” or a substitute return, based on your previously reported income. These estimates tend to be much higher than what you would’ve owed otherwise.
CONTACT A FEDERAL LOANS AND IRS TAX ATTORNEY IN TUSCALOOSA, AL
Call today at 205-349-1280 for a FREE Consultation with our local tax attorneys from Eric Wilson Law, LLC. When you choose us to handle your complex tax issues and student loan debts, you can rest assured that we’ll provide you with quick financial relief.
We can help with any and all issues regarding student loans and tax debt dismissal. From tax fraud allegations, tax filing, dealing with criminal tax charges, discussions with a tax professional, understanding federal tax code, discharging tax debt, student loan management, and far more, Eric Wilson’s bankruptcy and IRS tax attorneys do it all. Call us today for more information on how we can best serve you.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
The following language is required pursuant to Rule 7.2, Alabama Rules of Professional Conduct. No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers. This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.