How to Deal W' State Back Taxes - Filing Soon

[gmk]

We owe the state of Illinois app $850 for 2008 tax. I have until 04/07/2010 to remedy without further ado from the state. We are signing the CH7 BK today and expect to file soon thereafter. I'm not sure if I'll get any face time w' the attorney at the signing ceremony to ask these questions but I will put them to the paralegal to pass on.

I guess I have some options:

1- Do nothing at this point in time and try to settle up with IL after BK? Likwly at some increase in cost due to interest, penalties, etc.

2- Pay the $850 prior to filing. Will this be preferential?

3- Pay the $850 after filing but before the 341?

4- Request an installment agreement pre-filing? After filing but before the 341?

[mtbc]

I owe state taxes too. Their terms are fairly good, so I just waited until after my case.

I don't know if paying beforehand would be preferential. They're unsecured priority debt, right? If you don't have any dischargeable debts at equal or greater priority, I'm not sure how any creditor really loses out. I'll be interested to see how others answer that.

You could pay after filing with money you earned after filing. Otherwise, apart from spending on essentials, personally I'd wait at least until after the trustee accepts your exemptions (files their report of no distribution, or whatever) -- if you're using exempted cash to pay, the trustee may be irritated if you make unnecessary payments with it before they've had a chance to disagree with you about your exemptions.

The state may not want to touch you with installment agreements with a bankruptcy case mixed in: I expect I'll have to make an entirely new installment agreement with the IRS now my case closed.

[SleeplessMI]

I owed $2,000 in state taxes and paid up shortly before I filed. My atty told me it's not a preferential because governments are priority creditors. I've also remained current on a $400 a month installment agreement with the IRS before, during, and after filing BK. Again, no problem because it's a priority creditor.

For me, paying the balance owed was preferable to dragging yet another creditor into the bankruptcy. $850 isn't a lot of money (if you have it). If you don't pay before you file, you MUST name the state as a creditor on your BK petition (required under the BK code).

[mtbc]

Huh, the IRS stopped sending me the payment stub things after I filed.

[SleeplessMI]

They've kept sending them to me. My atty said they might quit and they might not. Accountant and atty both said to stay current on the installment agreement if I could manage it.

[vb1962]

we owed both kansas and federal back taxes. we called both the sate and the irs and they said we would not have to make payments until after our discharge..we just need to call them and set them up

[gmk]

Thanks for insight. Atty said the same thing as SleeplessMI said, it's not preferential as it's priority debt. I'll likely call the state tomorrow and clue them in. Let y'all know how it pans out. Thanks again.