Attorney's delay in filing my Ch7 just cost me $500 with IRS :(

[phoenyx]

Once again, I'm frustrated with my bankruptcy attorney's delay in filing my Chapter 7 petition in a timely manner. As far as I can tell, I'm out $500 because of it now.

I gave my attorney all the information needed to prepare and file my Chapter 7 petition on February 20, 2008. I had learned everything needed to file the petition pro se myself, so gave my attorney the information in the format that the petition is in -- to make it that much easier to use.

Then, he had some personal things come up which I can understand. His mother broke her hip, so he had to help her get into an assisted living home. He became ill, with a 104 degree temperature, and was lacking energy after getting better.

But that all ended several weeks ago. I've been telling him how I need to get my case filed ASAP for a few reasons, including that it absolutely without a doubt had to be in by March 31, or I would lose a ton of money.

My paperwork given on February 20 sat in a file until last week when his paralegal assitant typed in my creditors. Tomorrow, I'm meeting with him to finish the rest, and (hopefully) get it filed.


One of my debts was $500 to the IRS from the tax year 2003. It met all the requirements to be discharged, so I would have had that debt wiped out.

Under my attorney's advice, I filed my old (2004-2006) tax returns the day after I met with him on February 20. They have decent sized tax refunds.

I just got a letter yesterday from the IRS, that they took $500 out of my pending refunds to cover my tax year 2003 outstanding balance.


Had the bankruptcy petition been filed slightly sooner, in a more timely manner, the stay would have been in effect and they couldn't have netted the $500 against my outstanding balance. My $500 outstanding balance would have been wiped out.

Unless I'm misunderstanding what would have happened, now I'm out $500.


Is there any way that anyone sees to get that money back from the IRS? I can't see a way. For whatever reasons, the bankruptcy estate wasn't created, so there wasn't a stay. From the IRS point of view, I think taking part of the refund is allowed, necessary, and legal.

[phoenyx]

I just noticed the IRS notice I received says "Date: March 31, 2008" in the top right corner.

It obviously was sent previous to that, because I received it yesterday.

... I guess I can try after tomorrow saying the stay went into effect on March 31, 2008, so if they date the taking of the refund to that day, that violates the stay so they can't do it... But I think that's a longshot.

[rfassett]

I concur it is a long shot. It was my understanding, however, is that a requirement of filing for bankruptcy protection was that all tax return filings had to be current. Obvioulsy one of the reasons for that rule is that the IRS can do just what they did in your case. And just for the record, your attorney may have saved you more money than he cost you. If you would have waited until after April 15th to file that 2004 tax return, the refund therefrom would have been forfeited under the 3 year SOL. Also, if you have sizable refunds coming, what makes you think the trustee will not capture those? Or do you have them exempted somehow?

[phoenyx]

I concur it is a long shot. It was my understanding, however, is that a requirement of filing for bankruptcy protection was that all tax return filings had to be current. Obvioulsy one of the reasons for that rule is that the IRS can do just what they did in your case. And just for the record, your attorney may have saved you more money than he cost you. If you would have waited until after April 15th to file that 2004 tax return, the refund therefrom would have been forfeited under the 3 year SOL. Also, if you have sizable refunds coming, what makes you think the trustee will not capture those? Or do you have them exempted somehow?

A requirement for filing bankruptcy is that tax filings are current. I might be mistaken, but I thought that since they process them after they received them, that you could file them and become current, then file bankruptcy after that to protect refunds from being applied toward dischargable tax debts before they had time to take them. I could be wrong, maybe they get around the stay in part by dating the seizure of refunds as of the day you filed rather than the day they got around to it.

You are right about the general 3 year SOL expiring on April 15, 2008 for 2004 returns. I didn't mention that I am individually

[epiphany]

I just noticed the IRS notice I received says "Date: March 31, 2008" in the top right corner.

It obviously was sent previous to that, because I received it yesterday.

... I guess I can try after tomorrow saying the stay went into effect on March 31, 2008, so if they date the taking of the refund to that day, that violates the stay so they can't do it... But I think that's a longshot.

I can't answer your questions but did want to comment about the date on the letter because I recently filed my 2006 taxes and got a letter saying that they could not direct deposit because I had filed so late. But I thought it strange that I received the letter before the date it was dated. They also said that I would not get my refund check for 3-4 weeks and I got it the next day. Bizarre.

ep