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Chapter 13 can help tackle debt stemming from neglected taxes

Residents of states like Massachusetts are generally used to the tax-related obligations that come with living in the region. Sometimes, though, tax debt can snowball out of control. Massachusetts residents may remember Sinbad, a comic who played starring roles in several movies from the 1990s. While Sinbad once enjoyed considerable prosperity and popularity in showbiz, he has apparently fallen on hard times as of late and recently filed for Chapter 13 bankruptcy protection, largely due to tax obligations.

This marks the second bankruptcy in recent years for Sinbad. While he filed for bankruptcy relief in 2009, the bankruptcy court dismissed his case after he did not complete all of the necessary paperwork to move forward with the proceeding.

According to the paperwork filed in this more recent bankruptcy, most of Sinbad’s financial woes relate to state and federal tax debt. Sinbad reported that he owed $8.3 million in back taxes to the IRS and also $2.3 million in back taxes to the state of California. Sinbad’s delinquent tax bills date back to 1998.

Sinbad claims that he earns $16,000 a month, presumably from his ongoing gigs. While this might be a high income relative to what an average American household brings in every month, it is probably not nearly enough to cover the millions the comedian owes. Moreover, Sinbad also claims that he does not own enough assets to put a meaningful dent into his debt even if he did sell them all off.

While a Chapter 13 bankruptcy may not be able to get Sinbad completely discharged from his back taxes, it could at least help a person in his situation make manageable payments toward obligations. Chapter 13 may also help reduce interest payments on some forms of debt. This type of bankruptcy can also help someone organize and discharge other debts, so that more effort can be devoted to paying taxes.

Financial hardship can affect anybody, and even comedians like Sinbad may find themselves needing the fresh financial start that bankruptcy affords. Even if he or she is a high earner, a Massachusetts resident who is struggling under the weight of mounting debt may want to consider a Chapter 13 bankruptcy as a viable and effective remedy against a mounting financial crisis.

Source: TMZ, “Sinbad bankrupt: comedian broke, files chapter 13 bankruptcy, second time since 2009, owes $8.3 million to IRS,” Andrew Meola, May 20, 2013