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Bankruptcy could be option for Melissa Gilbert

The middle class was not the only group of people hit hard by the recent recession. People of all income groups suffered from a sudden collapse of property value and an absence of well-paying jobs while unemployment in Washington seemed to steadily climb. Even celebrities were not immune to the financial devastation that so many experienced, as evidenced by the overwhelming debt with which Melissa Gilbert is struggling. It is possible that she might come to the conclusion that, with that much debt and little comparative income, filing for bankruptcy might be the most appropriate course of action. 

At 51 years old, the former "Little House on the Prairie" actor owes over $360,000 to the federal government for back income taxes. Another state claims that Gilbert also owes taxes there to the tune of approximately $112,500. She cites the recession as a significant factor in her blooming debt, but also notes that her divorce and fewer acting gigs also contributed.

Although Gilbert claims that she was able to negotiate a payment plan with the IRS, it is unclear if her revenue stream will ever reach pre-recession levels again. She and her husband recently relocated from a large, historical home to a small log cabin, which could possibly be an indication of a less than favorable financial situation. Additionally, it is unclear if any type of repayment plan has been addressed for the state taxes that she still owes.

While many people in Washington seem to operate under the misguided impression that taxes are not dischargeable by bankruptcy, this is not necessarily true. When it comes to federal tax debt, so long as the debt is income tax, a Chapter 7 bankruptcy may help people effectively discharge some and perhaps all of the back taxes. This process can also remove any liens placed by the federal government.

Source:, "Big debt on the prairie: Melissa Gilbert owes IRS $360K", Robert Snell, June 12, 2015

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