Filing for Chapter 7 bankruptcy may help Tennessee residents and others eliminate some or all of their debts. However, some debts such as payroll taxes owed or back child support cannot be eliminated in a Chapter 7 filing. It is also unlikely that student loan debts will be discharged in such a proceeding unless a judge finds that doing so would constitute an undue hardship.
In most cases, filing for bankruptcy won’t be the basis for an IRS audit. As 1.5 million people file for bankruptcy each year, it wouldn’t be practical for the government to review the tax returns of everyone who does so. Instead, the IRS focuses on those who don’t file or pay taxes in a timely manner. In some cases, debts that were paid in full or otherwise taken care of in the past will still remain on a credit report.
If this happens, an individual can ask for the information to be verified by the credit bureaus. Individuals may also ask creditors to send information to the credit agencies to prove that debts have been paid or otherwise resolved. Inaccurate information on a credit report may lead to a lower credit score, which may make it harder to get a loan or to get a loan without a cosigner.
Individuals who are seeking to obtain debt relief may want to file for bankruptcy. Doing so might make it possible to have some or all unsecured debts discharged in a short period of time. Those who file for bankruptcy may also receive an automatic stay of creditor contact. This means that creditors typically cannot repossess property or follow through with a planned lawsuit. Debtors who want to learn more about Chapter 7 bankruptcy may do so by speaking with a legal professional.