How to Deal with Trust Fund Taxes and Joint Debt in Bankruptcy

Trust Fund Taxes and Joint Debt in Bankruptcy

Two special cases that regularly pop up during bankruptcy filings are trust fund taxes and joint debt. It’s easy to be confused when reading over bankruptcy laws and tax laws, so it’s important to partner with a skilled and experienced bankruptcy attorney from Steiner Law Group.

Trust Fund Taxes in Bankruptcy

Bankruptcy views trust fund taxes as a unique situation, as those taxes take priority during repayment and the debt is not dischargeable through bankruptcy. Trust fund taxes are also known as payroll and withholding taxes, and often arise in the business context. The withholding of trust fund taxes is separate from the taxes employers pay to contribute to Social Security on the employee’s behalf. Since the payment of payroll taxes is completed by the employer, the business is treated as a fiduciary for all owed funds. If that employer takes the money from the paycheck but does not pay it to the state or federal government, that failure is seen as theft.

With trust fund taxes, the agents who were responsible for paying the funds to the taxation authority are considered liable for the debt. Regardless of the age of the payroll taxes, the debt cannot be discharged. Chapter 13 bankruptcy is typically the best choice for individuals who find themselves liable for trust fund taxes as it can allow them to pay it back over time.

Joint Debt in Bankruptcy

Joint debt is another issue that an experienced bankruptcy attorney should be familiar with. Maryland is not a community property state, which means that debts acquired after marriage are only the responsibility of the spouse that incurred them. Therefore, you have the option to file for bankruptcy separately without your spouse, should you decide to do so. If you file for bankruptcy with joint debt, it makes your spouse eligible to be pursued for payment by creditors during a chapter 7 bankruptcy. A chapter 13 bankruptcy has an additional benefit called the co-debtor stay, which extends the automatic stay normally afforded only to the debtor to a co-debtor as well.

Work with Steiner Law Group to Handle Your Bankruptcy Questions

Steiner Law Group has years of experience working with individuals, families and businesses to safeguard assets and secure a better future through Chapter 13 bankruptcy. To learn more about how you can protect your assets, deal with trust fund taxes and prepare for bankruptcy contact us today by calling (410) 670-7060.

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About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.