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Taxes owed to the IRS and other taxing agencies (state & local) are
priority debts when filing bankruptcy. Because of the assigned priority,
taxes most taxes are not dischargeable in Chapter 7. Even though the
automatic stay prevents adverse judgments, levies, seizures and even the
enforcement of tax liens, the relief obtained is of short duration in
most Chapter 7 cases. Tax authorities will prevail when seeking to lift
the automatic stay because of their priority status.
Past due taxes and bankruptcy filed under Chapter 13 are treated
differently. In a Chapter 13 plan, past due taxes may be included within
the plan, and by law, are then presumed current. Chapter 13 is the
preferred choice for preventing loss of homes, cars and personal assets
when tax assessors and collectors seek property seizure.
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