There are negative consequences of bankruptcy that last a number of years. However, there are certain situations when bankruptcy is the better option. One of the benefits of opting for bankruptcy is to gain the right to an automatic stay. The automatic stay prevents creditors from making any contact with you in order to request the money you owe. You won’t even get a phone call. This stay action is also applicable to the Internal Revenue Service. The second you go ahead and file for bankruptcy all your creditors and the Internal Revenue Service are legally obliged to back off.
It is with great relief tax payers discovers an automatic stay has the power to release a levy with immediate effect in the case of bankruptcy. This brings enormous peace of mind if you are in a precarious financial situation. However, even an automatic stay can’t hinder an Internal Revenue Service audit. Bankruptcy has no influence over Internal Revenue Service audits and can’t prevent them from being carried out as is confirmed by the Bankruptcy Code section 362(b) (9).
The reason bankruptcy is such a compelling instrument in working out Internal Revenue Service difficulties is because it does away with penalties, interest and taxes owed by you at the end of an Internal Revenue Service audit. There are certain conditions that do apply. For example, you must file for bankruptcy at the right time. 240 days must pass after the completion of an Internal Revenue Service audit to bankrupt the audit outcome.
Audits as carried out by the Internal Revenue Service is extremely meticulous and a means of them discovering your exact tax position. It is true you may not have the means to prevent such a process from taking place but if you file for bankruptcy it will eradicate any tax damage
