Questions regarding Chapter 7/One regarding lien release with state taxes

[hopeandme]

Hello all!

It has been a few weeks since I have posted about my IRS taxes in bankruptcy. I have found out from no help from my attorney that my 2005 & 2006 IRS taxes will most likely not be discharged due to the SFR which I learned about on here due to the great people who responded. I don't have my transcript for my 2007 IRS taxes and was on hold yesterday for over 2 hours trying to get them. One person transferred me to another department after I called. I eventually had to hang up. Do you happen to know if I can get an IRS transcript from my local office? I can't get one online because they don't go back that far online. I'm hoping they do via telephone or at the local office.

I did go down to my local comptroller's office to obtain my transcripts for tax years 2005-2007 per advice I received from someone via the telephone at the Comptroller's office. The state transcripts are very different from the IRS transcripts. They are very basic. I told the rep there that I needed my transcripts to see if my state taxes were dischargeable. He said he couldn't tell so he called someone at the Comptroller of Maryland's office and spoke with a rep there who said that he couldn't get a hold of the bankruptcy dept. but he sent them an e-mail to contact me. I finally did speak with someone who I thought sounded a little unsure of themselves. Maybe I'm wrong but he said my taxes are dischargeable. I asked him about the lien that was attached to my car and to my driver's license. He said that once my taxes are discharged the lien would be released. I thought the lien remained even though I no longer owed the taxes and questioned him on that and he said the same thing that the lien would be released when my taxes are discharged. I asked for his name but he would only give me his ID number. Should I be concerned? Should I try and reach someone else there? I really want to confirm that these state taxes are dischargeable and that the lien will be released.

Last, I'm a bit paranoid still about the schedule that my attorney put the taxes on. He put them on schedule E. Schedule E is for Creditors holding unsecured priority claims. I am reading on the internet that priority taxes are never discharged. If there is even a chance that they won't be discharged due to the schedule they are on I need to march in to his office because I still have not received answers to a few questions I sent to his office weeks ago.

Thanks for everything!
Hope

[bcohen]

The taxes belong on Schedule E, which is the correct place to list "Taxes and Other Debts Owed to Certain Governmental Units". Your attorney is listing the taxes in the correct place. Whether or not a debt is ultimately discharged is not affected by the fact that you place it on Schedule E (priority unsecured) or Schedule F (non-priority unsecured).

Likewise, if your driver's license is suspended due to nonpayment of taxes (or due to a judgment from an at-fault auto accident with no insurance), once the debt is discharged in bankruptcy, the state is required to give back your license. I do not know if a tax lien on a vehicle is automatically voided once the debt is discharged, or if you must file a motion to avoid the lien. Perhaps someone else can answer that.

[jleissler]

The taxes belong on Schedule E, which is the correct place to list "Taxes and Other Debts Owed to Certain Governmental Units". Your attorney is listing the taxes in the correct place. Whether or not a debt is ultimately discharged is not affected by the fact that you place it on Schedule E (priority unsecured) or Schedule F (non-priority unsecured).

Likewise, if your driver's license is suspended due to nonpayment of taxes (or due to a judgment from an at-fault auto accident with no insurance), once the debt is discharged in bankruptcy, the state is required to give back your license. I do not know if a tax lien on a vehicle is automatically voided once the debt is discharged, or if you must file a motion to avoid the lien. Perhaps someone else can answer that.

I had been advised if Tax Debts are non dis-chargeable they would get claimed on Schedule E, however if they are dis-chargeable they should be placed on Schedule F.

[justbroke]

Here's the real deal with IRS Taxes. As bcohen eluded, they either are or are not dischargeable (period). While it would be nice to put them on the appropriate schedule, that is not what controls. When it comes to the IRS, the Special Procedures Function (SPF) will typically tell you whether the IRS considers them to be dischargeable or not, and if they are dischargeable the IRS will take the appropriate actions!

As for the local taxes and the liens, that, again, is up to the local taxing authority. Should they decide to treat the taxes as discharged and they unilaterally file a satisfaction of lien (or otherwise have the lien removed from the public record), then that is their decision.

If you do not like their decision (IRS or local taxing authority), then you would file a Complaint to Determine Dischargeability with the Bankruptcy Court and argue your position there. A judge would determine whether the taxes are in fact dischargeable and rule based on the rules, bankruptcy code, and precedence.

That's pretty much it. You typically wait to see what the IRS and taxing authorities do, and then decide what you want to do based on their actions.

As Desprifreya reminded me, taxes are special and there is no way to avoid [their] lien if the tax is non-dischargeable. Des also mentioned that in his practice, they typically "tickle" the IRS (and perhaps local taxing authorities) by letter (not by phone call) to determine the position of the taxing authority. This also gives your their answer in a writing (and not operator #22 who would not give you their name)!

[hopeandme]

Thanks! Yes, I think I will go ahead with the letter for the state. I can tell for 2005 & 2006 with the IRS that they are not dischargeable due to the SFR. I was worrying about the schedule E again because two reputable sites had mentioned that they may not be dischargeable if they are either on the wrong schedule or priority taxes.

Justbroke I think you should practice law. Of all of the attorneys I spoke to over the years regarding discharging my taxes none of them until you ever brought up my issue with filing and me finding out about the SFR. I know I would refer everyone to you and Des. Thanks so much!

Thanks to bcohen and jleissler as well!!

[hopeandme]

So I called back the state's bankruptcy department today and got the same person! Ugh! They were not willing to give me their address and said that they weren't obligated to send me anything in response to a letter. I was told once the taxes are discharged in bankruptcy I will receive a letter at that point. I'm not happy. I don't want to push too hard and make this person angry with me in fear of some type of retaliation.

Last, am I allowed to list two sites that mention something about taxes possibly not being dischargeable due to the schedule they are on? I wanted Justbroke, Des and anyone else who may want to chime in to see this. One is a very reputable and well known site.

Thanks friends!

[justbroke]

As I wrote above, the IRS is typically very good and "honest" about dischargeable taxes. If you disagree with their position, you fight it with the court. The IRS probably does not care which schedule you place them on; they only care if they are collectible!

Again, taxes are either dischargeable or not dischargeable and the scheduling does not affect this. Otherwise, everyone would just put the taxes on Schedule F, hope the IRS does not notice, and be done with it. The IRS is typically very good about filing a claim, especially in Chapter 13s. The IRS claim would show exactly what they consider to be "subject to discharge" and what is priority non-dischargeable.

As for the letter to the State, just write it anyhow! Send it certified mail return receipt requested (CMRR). You should be able to find the correspondence address for your State taxing authority. Just put ATTN: Insolvency/Bankruptcy. At least you'll have it documented that you reached out to them. (If that means anything.)

As for practicing law, I once thought about it, but it would have been intellectual property law. I wish that I was already a (bankruptcy) attorney back in 2005. Now that would have been nice.

The majority of the topics on which I post heavily on this website are from actual experience with managing my personal Chapter 13 and conversion to Chapter 7. I have dealt with everything from taxes, to exemptions, to mortgages, to foreclosure, to relief from stay oppositions, to reaffirmations, to lease rejections to lien strips to objections to claims, to motions to compel, to two complaints (adversary proceedings) initiated by myself, to case reopening, to amendments... and the list goes on!