Don’t Pay Your Taxes With Your Credit Card!
My name is Ron Drescher. I’m an attorney practicing
bankruptcy and creditor’s rights in Maryland, Delaware, Pennsylvania and Virginia and today
I want to answer the question I owe a lot of taxes. Should I pay that tax bill with
my credit card? Well if you’re considering bankruptcy at some point down the road, the
answer is definitely no, don’t do that because there’s a specific exception to the Chapter
7 discharge that says you cannot discharge credit card debts that were incurred to pay
non-dischargeable tax debts. It’s like you’re swapping out one kind of tax debt for another.
The bankruptcy code considers that to be unfair. So they’re not going to let that kind of behavior
fly under the bankruptcy case. Now an interesting twist on this is that if you file a Chapter
13 case, you can discharge those credit card debts as long as you pay over all of your
net disposable income over the 60-month term of the Chapter 13 payment. Now one of the
reasons why you don’t want to use your credit cards to pay your tax debt is because taxes,
they may have a 6 or 7 percent interest rate that you’re going to have to pay if you become
delinquent on your taxes and there might be penalties that you have to pay, but if you
can’t pay your credit card bills timely you’re going to be paying 18 percent, 25 percent
as high as 29�percent on your credit bills and you’re not going to be able to discharge
them in Chapter 7. So it’s just not a good financial move for you to make. My name is
Ron Drescher. I’m an attorney practicing bankruptcy and creditor’s rights and if you have a question
about how you should use your credit cards before you file bankruptcy, please pick up
the phone and call me. I would love to hear from you.