Chapter 7 and Back Taxes

[scg]

Hi all,

I just found this forum and what a great asset it is.

I filed for bankruptcy (under the old law) and just had my 341(a) meeting. I filed myself and used a paralegal firm to prepare the paperwork. The question I have is does anyone have any experience with chapter 7 and back taxes?

When I asked the paralegal firm if the back taxes would be dismissed, they stated they couldn't say for sure because they were not lawyers. But when I talked to lawyers they stated they couldn't say for sure because they were not trustees. Then when I had my 341(a) meeting, the trustee said he couldn't say for sure because he was not a Bankruptcy Judge. When I called the Bankruptcy Judge, she said she couldn't give legal advice because she wasn't a lawyer.

I have read the IRS Publication 908 (http://www.irs.gov/pub/irs-pdf/p908.pdf) and I meet all the stipulations to have it dismissed, but even it states "it may be dismissed" and nothing more. I called the IRS and they were no help at all. I can't find any resources that tell me if you meet the requirements of Pub 908, under which circumstances constitute they may be dismissed, and under which circumstances constitute they won't be dismissed.

So does anyone have any experience with back taxes and chapter 7? The taxes are from over 10 years ago, but with penalties and interest it is quite a large amount.

So feedback form anyone that has experience in this matter would be greatly appreciated!

Thanks,

SCG

[Minnymouth]

I'm not sure about the new law, but under the old law taxes 3 years or older could and have been discharged.
You had to meet certain criteria I believe.

Hopefully if they are old taxes they will dismiss them for you.

Keep us posted,

Minny

[bkfiler]

taxes over 3 years from the due date, or the filing date if you didnt file on time and did so later, can be dishcarged. doubt anybody complains about that at all. not sure.

anything more recent and you can't discharge them. or should i say attorneys wont try. i get the feeling they all just coward down to the gov on taxes and student loans becuae its the gov that you owe to but thats another story lol

[AAAArt]

Above info is correct with one addition. If the IRS has filed a lien against you, you must deal with that separately after the Bk. You have a good chance at winning and having them discharged, but liens are not automatically released under Bk. Hope that helps. Art

[scg]

Ok what I hear you guys saying is that if the back taxes are not classified as 2nd or 8th priority taxes per IRS publication 908, then I can expect to have them dismissed. Si?

[AAAArt]

I'm not sure if any of us have read IRS pub. 908, at least I haven't. Sorry. Art

[bkfiler]

i have and my brain sitll hurts from it. way too complex.

so i just asked attorneys and read postings.

search for bankruptcy and tax chat rooms/boards where you can find more help.

[scg]

Thanks all,

For anyone who is interested in this subject matter here is what I found on about.com from William Perez
(Reference) http://taxes.about.com/od/bankruptcy...ruptcy_tax.htm

Excerpt:

"Bankruptcy and Tax Debts
From William Perez,


Discharging Your Tax Debts in Bankruptcy
Income tax debts may be eligible for discharge under Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 provides for full discharge of allowable debts. Chapter 13 provides a payment plan to repay some debts, with the remainder of debts discharged. Under the new bankruptcy laws, tax debts are treated the same way in both Chapter 7 and Chapter 13 petitions. Not all tax debts are capable of being discharged in bankruptcy. The bankruptcy petitioner must have tax debts that meet five criteria for discharge.
Tax debts are associated with a particular tax return and tax year. The bankruptcy law lays out specific criteria for how old a tax debt should be.

Five Rules to Discharge Tax Debts
If the income tax debt meets all five of these rules, then the tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions.
(1) The due date for filing a tax return is at least three years ago.
(2) The tax return was filed at least two years ago.
(3) The tax assessment is at least 240 days old.
(4) The tax return was not fraudulent.
(5) The taxpayer is not guilty of tax evasion.
(6) No Lien has been filed by the IRS (added, see below)

1. Return Due At Least Three Years Ago
The tax debt must be related to a tax return that was due at least three years before the taxpayer files for bankruptcy. The due date includes any extensions.

2. Return Filed At Least Two Years Ago
The tax debt must be related to a tax return that was filed at least two years before the taxpayer files for bankruptcy. The time is measured from the date the taxpayer actually filed the return.

3. Tax Assessment At Least 240 Days Old
The IRS must assess the tax at least 240 days before the taxpayer files for bankruptcy. The IRS assessment may arise from a self-reported balance due, an IRS final determination in an audit, or an IRS proposed assessment which has become final.

4. Tax Return was Not Fraudulent
The tax return cannot be fraudulent or frivolous.

5. Taxpayer Not Guilty of Tax Evasion
The taxpayer cannot be guilty of any intentional act of evading the tax laws.

Some Tax Debts Not Dischargeable
Tax debts that arise from unfiled tax returns are not dischargeable. The IRS routinely assesses tax on unfiled returns. These tax liabilities cannot be discharged unless the taxpayer files a tax return for the year in question.

Other Tax Issues in Bankruptcy
Before a Chapter 7 or Chapter 13 bankruptcy can be granted, the bankruptcy petitioner is required to prove that the four previous tax returns have been filed with the IRS. The four previous tax returns must be filed no later than the date of the first creditors' meeting in a bankruptcy case.
Additionally, bankruptcy petitioners are required to provide a copy of their most recent tax return to the bankruptcy court. Creditors can also request a copy of the tax return, and petitioners must provide a copy to them."

~~

So it looks like if you include "a lack of a lien" as mentioned by others in this forum, this should give you the requirements to have your back taxes dismissed under a chapter 7. And this is basically the information in IRS publication 908 (which gave me a headache after reading also, and the reason why I was seeking additional verification).

The one question that I have now is, per AAAArt's post

...If the IRS has filed a lien against you, you must deal with that separately after the Bk. You have a good chance at winning and having them discharged, but liens are not automatically released under Bk...

If the IRS has filed a lien, how do you go about getting them discharged after the bk. Does anybody know what the separate process for that is, and how you get started?

Many Thanks,

SCG