IRS Installment Loan prior to bankruptcy

[ld2366eh]

Hi!

We currently have one IRS installment loan for tax years 2008-2011. Does anyone know what happens to the installment loan when I file for BK? It's my understanding that 2008 will be discharged since we filed on 4/15/2009, and the rest will still need to be paid after the Chapter 7 discharge. Will my installment plan be placed on hold during the automatic stay? (We are on direct debit with the IRS.)

Also, will I need to contact the IRS after we get our discharge, to reinstate the installment plan, or will they automatically reinstate it, or will they send me a big fat bill for the the amount due and expect me to pay it in full? Has anyone else had any experience out there regarding a situation like this? Any information would be helpful!

Thanks!

[HHM]

I assume you mean and IRS installment agreement (the IRS doesn't make loans )

The Installment Agreement gets terminated once you file BK. Once the bankruptcy is discharged (assuming a chapter 7 BK) YOU will need to call the IRS, generally they will simply reinstate it. However, if you will still owe more than $25,000, they will probably request updated financial information.

During the process, you probably will receive some disturbing notices from the IRS, don't freak out. (e.g. Your Installment Plan has been Terminated). Again, once the BK discharges, just call the IRS and get a new Installment plan put in place.

[SadPanda]

From everything I've read/heard, the 2008 taxes will be discharged and payment collection from the IRS should go on hold until after your discharge. I'm in an installment plan for my 2008 taxes too, and I don't have many payments left, but I'm expecting the rest to be discharged. I just filed my Chapter 7 recently, so I haven't received a letter or anything yet from the IRS telling me not to make any payments, but I'm also on direct debit for those payments - I assume they won't be taken out this month.

This thread from 2010 has some information about what happens with the IRS installment plan after you file - the poster AngelinaCat says she and her husband were in an IRS installment plan, and after their bankruptcy discharge, they received a letter from the IRS telling them what they still owed. They had to re-establish the payment plan, but she says they were able to negotiate a lower monthly payment: http://www.bkforum.com/showthread.ph...for-back-taxes

[ld2366eh]

Thank you!

[ld2366eh]

Thank you!

[AngelinaCat]

Yes, what Panda has said is true. We are finally up to paying off the 2007 IRS debt. With the lower payments, it is taking longer--and penalties and interest still accrue--but you do what you have to.

Every time we have spoken to someone at the IRS, they have been very courteous and professional. I would add, that should your situation change, and you have to adjust your payments, once they resume after your discharge, go ahead and call. Keeping them informed, has been the key--at least for us.

Also, should you get a refund along the way, don't expect to receive it. The IRS will take that and apply it to the outstanding debt.

Good luck to you!

[ld2366eh]

Thank you very much! I think we will be an asset case as well with our Chapter 7 (cars mostly), but I know our assets don't exceed the debt we still owe to the IRS. It's nice knowing that any money we end up paying to "buy back" our assets will go against this outstanding debt that we have to pay anyway. It'll make it easier going forward...

Everyone on this forum has been so helpful! You all definitely help me sleep better at night!!! Thank you all!

[SadPanda]

ld2366eh - I have an update to my post from a few weeks ago, which is also related to your question about whether the payments will be on hold during bankruptcy when the payments are directly debited. I filed my bankruptcy after last month's IRS payment came out of my bank account, and today was the day they would've taken out September's payment. They didn't take it out of my bank account.

However, I never got a letter from the IRS telling me they wouldn't be taking out the payments. Since I was set up for the monthly automatic debits, they wouldn't be sending me a letter telling me not to make any payments, as they're in control of my payments. But for whatever reason, I still thought they would send me a letter acknowledging that they wouldn't be taking out a payment during my bankruptcy. They were in my creditor/mailing matrix, so I knew they were notified of my bankruptcy, but I would've felt better knowing for sure that they weren't going to take it out of my bank account.

I was a little worried they might take it out, although I knew they'd be violating the automatic stay if they did that, and I would've tried to get it refunded if they did take it out. If it wasn't getting discharged, I wouldn't have that many payments left to make anyway, since I don't owe that much more (the last few payments would basically be going towards the accrued penalties and interest, so I've technically paid back the actual taxes at this point). But since it should be getting discharged, I wouldn't have wanted to make an extra payment I didn't have to make.

I just figured I'd post this so you'll know that once the IRS knows you filed for bankruptcy, you may not get a letter if your payments are automatically debited, but based on my experience, they won't take out your payment during the bankruptcy. I'm not sure if the automatic stay goes into effect immediately (e.g., if you file for bankruptcy the day before the IRS payment is due to come out of your bank account), but hopefully it does.

[AngelinaCatHub]

ld2366eh - I have an update to my post from a few weeks ago, which is also related to your question about whether the payments will be on hold during bankruptcy when the payments are directly debited. I filed my bankruptcy after last month's IRS payment came out of my bank account, and today was the day they would've taken out September's payment. They didn't take it out of my bank account.

However, I never got a letter from the IRS telling me they wouldn't be taking out the payments. Since I was set up for the monthly automatic debits, they wouldn't be sending me a letter telling me not to make any payments, as they're in control of my payments. But for whatever reason, I still thought they would send me a letter acknowledging that they wouldn't be taking out a payment during my bankruptcy. They were in my creditor/mailing matrix, so I knew they were notified of my bankruptcy, but I would've felt better knowing for sure that they weren't going to take it out of my bank account.

Actually, they will eventually send you a letter from their BK section, but if in any case, they still take out, don't complain, it has to be paid in any case. Like Student loans it will not be forgiven (unless out of the three year limit).

I was a little worried they might take it out, although I knew they'd be violating the automatic stay if they did that, and I would've tried to get it refunded if they did take it out. If it wasn't getting discharged, Don't rock that boat. You owe it and they will get it now or later. I wouldn't have that many payments left to make anyway, since I don't owe that much more (the last few payments would basically be going towards the accrued penalties and interest, so I've technically paid back the actual taxes at this point). But since it should be getting discharged, I wouldn't have wanted to make an extra payment I didn't have to make.
Not really so. The stay "Tolls" or "freezes" time but does not gift you the missed payment.
I just figured I'd post this so you'll know that once the IRS knows you filed for bankruptcy, you may not get a letter if your payments are automatically debited, but based on my experience, they won't take out your payment during the bankruptcy. I'm not sure if the automatic stay goes into effect immediately (e.g., if you file for bankruptcy the day before the IRS payment is due to come out of your bank account), but hopefully it does.

The time lapse could be acceptable by any Judge. By theory, yes the stay starts the minute you get your case number. Ours was stopped by them, but as others above stated, it is up to you to start the payment plan over. From 27K, we are down to 8K and we asked for a reduction of payment starting this month. We started at 450, reduced to 250, and now to 100. OH yes we know the interest accrues but we do have to live in this situation. No work, and too old, or too "over qualified". Depression 2012. 'Hub

[SadPanda]

Hi, 'Hub - I'm not sure if you read my previous post from a few weeks ago, but the post I made earlier today was just following up on what I had said – my taxes actually should be getting discharged, because I meet all the qualifications (over three years old, etc.). I didn't mean the original poster's taxes would get discharged if they didn't meet those qualifications; I was just answering their question regarding the payments being on hold during the BK when the payments are automatically debited. I wondered the same thing, so I wanted to let this person know, since he/she also has the payments automatically debited.

I think the reason they didn't send me a letter was because mine (like the original poster) were taken out automatically. If I made the payments myself, I'm sure I would've gotten a letter telling me not to make payments for now. And, of course, if they weren't going to be discharged, I'd get a letter and/or bill from them after the discharge.

If my taxes weren't going to be discharged and they had taken out a payment today, I wouldn't ask for it to be refunded if they took it out, because that would be another payment I'd have to make anyway. Although if that happened, I'm pretty sure I technically could have my attorney write them a letter asking for a refund due to the automatic stay violation, but I don't think I'd bother if my taxes weren't going to be discharged.

I won't be starting the plan again, since these taxes will be discharged (or at least they "should" be), but the original poster will need to re-establish the plan for the more recent taxes (which I mentioned in my post from a few weeks ago). I just wanted to assure the original poster that their IRS payments won't be taken out via automatic debit during their bankruptcy, since the poster had asked about that in their original post.

[AngelinaCatHub]

I see. Go for it. Hope it works out and I believe you could get any overpayment back. 'Hub

[ld2366eh]

Thanks for letting me know how your experience was! We are filing within the next week or so, well in advance of my auto payment set for the 28th...