An individual’s debts are solely his or her responsibility. However, people can be held responsible for a spouse’s debts in two different ways. In states with community property laws, jointly held assets can be used to pay debts. Secondly, back taxes can be a liability for the other spouse if the couple files joint tax returns. If a couple chooses to do so, both spouses are equally liable for all tax debts.
Using the “Innocent Spouse” Legal Defense
Congress has recognized that joint liability for tax debt can unfairly burden a spouse in some cases, and it has established an innocent spouse defense to help. To use the defense, the following elements of proof must be satisfied:
* A joint return must be filed for every year being questioned
* The returns must feature a significant understatement of tax, as a result of errors by the other spouse
* The innocent spouse must not have known about the errors and understatements
* It would be unfair to hold the innocent spouse responsible
* The defense must be lodged within two years of the initiation of collection attempts
Applying the Defense During Bankruptcy Cases
Courts have three scenarios for the defense:
* If both spouses were in bankruptcy
* If the innocent spouse is bankrupt but the other spouse is not
* If the innocent spouse isn’t in bankruptcy
Success of the Innocent Spouse Defense
If the court can consider the defense in Chapter 13 Bankruptcy in Hamilton OH, its success will depend on the level of understatement and on the requirement of knowledge by the other spouse. The determination can be complex, and courts are divided as to their findings. Usually, the use of the innocent spouse defense depends on the case’s circumstances and facts. If the defense is successfully applied, the court grants full or apportioned relief to an innocent spouse.
If Spouses are no Longer Together
For the purposes of the defense, those who are widowed, separated for a year, or divorced are considered married no longer, and can use the defense to minimize their liability for the other spouse’s bankruptcy and tax debts.
Hiring an Attorney
The use of the innocent spouse defense depends on the jurisdiction in which the case is being heard. If you are facing tax liability or Chapter 13 Bankruptcy in Hamilton OH because of your spouse’s deeds, you should Visit R. Dean Snyder Attorney to determine whether you can eliminate or reduce your liability.