Threat of AP under §523(a)(14) for taxes charged to CC

[abkguy]

Pro-se no asset chapter 7 filed this month. Received letter from creditor's counsel regarding ~1500 charge for tax payment to US Treasury. Letter claims creditor is "considering" filing AP objecting to discharge of this part of debt and wants "explore possibility of settlement". Charge was made 6 months prior to filing, and minimum payments were made to this creditor for at least 2 months after the charge. Letter incorrectly claims that credit limit was exceed as a result of this activity.

I've read on this forum that these are standard letters trying to extract settlement and that they will not actually pursue AP due to expenses exceeding what they can recover. Is there any chance they would pursue it, and if so, how sound is their case likely to be?

[tobee43]

i think you may be alright....however, it will solely depend on the type of tax you owe. many taxes are simply NOT dischargable.

[HHM]

Actually, your situation is a little more precarious, if you charged a tax debt to a CC that is non-dischargeable, so long as the underlying tax debt was non-dischargeable, the CC debt would be non-dischargeable. Go ahead and settle, the normal rules of 6 months time frame, making minimum payments do not apply to this sort of case.

Bottom line, call their bluff, make them file the AP, and then try to settle after they file the AP.

[biotechsolution]

your best bet is to settle after they file the AP. If they file the AP they will win, it just matters if they consider the 1500 worth it.

[abkguy]

Thanks, that's kind of what I was thinking. If they win do they get to add their legal fees to the judgment? Or is only if they bring the case and lose that they would be liable for mine? I would imagine their fees would run more than what they can recover in the judgment, and that's money out of pocket for a difficult to collect judgment against a broke person that they would probably end up selling to collections agency for something like 30 cents on the dollar.

[keptdigging]

Yes they can get their legal fees if they win (though I don't think it's automatic.) But you're right about the cost/benefit from their perspective which is why step 1 is to make them file the AP to show they're serious. Because they have to pay the legal fees first and hope they collect on the judgment. They might just walk away rather than litigate.

And yes, if you win they could wind up liable for your legal fees (it is not automatic though.) But this is a classic non-dischargeable debt--you're not going to win.

So I agree with the others: make them file, then negotiate a settlement.

[blockhead]

I got one of those from Amex attorney - I had paid 2 or 3K in taxes using their Card. They asked if we could provide more info (like what tax year applied to) so they could determine if it was a dischargeable debt or not. Fat chance. My atty said ignore them and they'd go away, and they did. Just not worth their while.

[abkguy]

Well 2 days before deadline they filed it. Weinstein & Riley is the firm - I've read elsewhere they like to follow through these things. I'll call them and see how much they want to settle. If they take an unreasonable stance, then what I do need to do to respond to this legally? If are going to win anyway is there anything I need to do in this case?

[chrisdfw]

All they get if they win is that the debt is not dischargeable. How much of a problem this is for you depends on your state and what collection power they would have on a judgement.

Settle it for as little as you can. Be knowledgeable about what they can do to collect. Knowledge is power

[abkguy]

I'm kind of in a conundrum here. I don't really have the cash to settle with them right now. And if they get the judgement, collection will be difficult as I have no non-exempt assets or income right now. That said, I don't really want to have this following me around, since in OH it will last for 21 years.

They are asking for the taxes paid plus interest at the CC rate (something like 25%) up until the judgement is issued, plus costs. Are they entitled to all of this? I'm considering filing a response stating that 1) they have not demonstrated non-dischargability of the taxes paid (it's required under 523a14 that the taxes paid would not have been dischargeable) and that 2) they have not provided a legal basis for requesting interest and costs.

If they just got the judgement for the taxes only it's not so bad as I can probably settle that later for much less than face value since they would have to pay a judgment collector 50% anyway, and as I said it's not even legally collectible right now. If they can get a bunch of other crap tacked on that would make more expensive for me in the long run.

The good news is that other than this AP, I now have a discharge.

[tobee43]

if you are asked to "settle" you can work out payments with them.

your atty should get the "taxes" and interest removed....prior to any settlement that you structure with them if you HAVE to.

this is really a sticky one....as pointed out earlier irs taxes are NOT and never discharged, however, in this case it's a creditor whom paid the taxes and you owe them...i think this is quite interesting really....because you actually at this point do not owe the taxes but the creditor.

were not the taxes paid by the creditor????...i believe the scare tactic used by the creditor here, is the use of the word irs or us treasury debt.....which was paid...but that should leave the treasury out of the equation... ????? since IF the money was pd to them you only actually OWE the creditor....and if that payment was 6 months prior to your filing, i find it hard pressed as to how in the world the creditor would qualify under the fraud 90 day period...or even prove the fraud???

i still think there is a way out of this. i know we filed in a state where it was the 90 rule for creditors period....i don't know about ohio.

[DebtEnder]

Well IRS taxes can be discharged if they are 3 years old. If the creditor can prove these taxes were within 3 years that the OP then charged to a CC then the case is clear. If the Taxes were charged and then MANY MANY months of payments were made you could argue the principal of the taxes had been paid as well. However 2 months of minimums does not equal paid off taxes. Your only real defense would be these were 3 year old taxes and as such would be discharged anyways. Even then I don't think you would fare well as then the IRS gets paid when they should not have and the CC bears the loss instead.

Best bet is to work out a settlement. Get the crap charges taken off and offer at least close to what you charged in the first place.

[tobee43]

Well IRS taxes can be discharged if they are 3 years old. If the creditor can prove these taxes were within 3 years that the OP then charged to a CC then the case is clear. If the Taxes were charged and then MANY MANY months of payments were made you could argue the principal of the taxes had been paid as well. However 2 months of minimums does not equal paid off taxes. Your only real defense would be these were 3 year old taxes and as such would be discharged anyways. Even then I don't think you would fare well as then the IRS gets paid when they should not have and the CC bears the loss instead.

Best bet is to work out a settlement. Get the crap charges taken off and offer at least close to what you charged in the first place.

i agree.....but this one away asap...but do get those charges removed....but i would attempt a much lesser amount if possible...one can ALWAYS go up...it's difficult to come down...