Dealing with tax collection while in Chapter 7

[pdxgrrrl]

Hey there,

My Chapter 7 was filed in June and I'm now in the 60-day club. A big part of my financial problem is tax debt. I hadn't filed my returns for a few years (dumb!), but did so before declaring BK. Now my taxes have been assessed and the bills are coming in. This is where I get scared.

First, I received a CP 503 notice from the IRS this week demanding payment of over $10k within ten days or else they'll be forced to take further action. Naturally, I don't have the money. (I mean, DUH, I'm bankrupt!) I have no clue how to deal with this letter. I'm very scared and worried about the IRS coming after me even more now.

Second, I'm finally going to start getting unemployment benefits this month. I owe the state of Oregon back taxes. Can they garnish my unemployment? If so, for how much? I need that money to live on. Things have been very rough for months and I'm not sure if I can handle another economic hardship. I've been barely surviving on about $1,000 per month. I'm dirt poor and can't afford to lose any income after having my hours cut, losing my job, etc. I know an enrolled agent who could possibly help me, but he wants almost as much money as my BK lawyer did. Dude, I'm BROKE.

If anyone has any insights or suggestions, I'd love to hear them. I thought my problems would end with the BK. Ha, yeah right.

[jribe]

generally tax debts that are more than 3 years old can be included in your BK. I would recommend your contact a TAX attorney to clarify your situation (do not ask a different type of attorney- they are not experienced in everything) and try to ammend your BK filing.

Good luck

Hey there,

My Chapter 7 was filed in June and I'm now in the 60-day club. A big part of my financial problem is tax debt. I hadn't filed my returns for a few years (dumb!), but did so before declaring BK. Now my taxes have been assessed and the bills are coming in. This is where I get scared.

First, I received a CP 503 notice from the IRS this week demanding payment of over $10k within ten days or else they'll be forced to take further action. Naturally, I don't have the money. (I mean, DUH, I'm bankrupt!) I have no clue how to deal with this letter. I'm very scared and worried about the IRS coming after me even more now.

Second, I'm finally going to start getting unemployment benefits this month. I owe the state of Oregon back taxes. Can they garnish my unemployment? If so, for how much? I need that money to live on. Things have been very rough for months and I'm not sure if I can handle another economic hardship. I've been barely surviving on about $1,000 per month. I'm dirt poor and can't afford to lose any income after having my hours cut, losing my job, etc. I know an enrolled agent who could possibly help me, but he wants almost as much money as my BK lawyer did. Dude, I'm BROKE.

If anyone has any insights or suggestions, I'd love to hear them. I thought my problems would end with the BK. Ha, yeah right.

[southernbelle]

Sorry for the long reply.

I know EXACTLY what you are going through. I found out that my ex didn't file returns for my business and I owed the state and IRS LOTS of money after I finally closed it (close to $100k). I owed too much and didn't make enough to file a chapter 13 which would have been my first choice to pay the debt and move on with life, but I successfully filed a chapter 7 because of other debts and received my discharge and my asset case finally closed, but the tax debt still remains. In my case, the state did levy my paycheck and I quickly contacted them and got back on a payment plan with them and I'm working with an Enrolled Agent to send in an OIC by the end of this month to the IRS. In my case I don't own anything except my house that has liens over and above it's value and my car that isn't worth anything so they might be willing to deal with me on the back taxes but since they are business related they might tell me to take a hike and if that happens I'll just start an Installment Agreement with them (hopefully one that is affordable) and will pay that amount for the duration of the statute of limitations which is about 9 years. I wish I could afford a chapter 13 because if I could I'd file a 13 in a heart beat.

Due to the fact that your taxes were filed similar to mine which was right before you filed BK, did you include them in your BK? Even though they would not be dischargeable, including them will at least give notice to those creditors that you are in BK and you are protected at least temporarily by the Automatic Stay which will mean they won't harass you until your BK is discharged/closed, but trust me they are VERY patient.

If you didn't include them you might want to let them know you are in a banruptcy so that you'll have at least a couple of months to decide how to deal with them. If you are unemployed and don't have any disposable income, it seems like you would be a good candidate to be declared non-collectible by the IRS or might get a successful OIC. Most states have the same type of OIC program that seems like they pretty much follow the IRS's format. You may be deemed temporarily not collectible by the IRS due to the fact that you don't have any money but that status could change based on your job situation because the IRS can do a periodic evaulation of your situation and pick up where they left off with collections if you have income all of the sudden.

If you could possibly convert your chapter 7 to a 13 to pay the taxes, that would be ideal because your monthly payments wouldn't be nearly as much as if you let the penalties and interest accrue over a few years time and at the end of the 13, you owe nothing. In my case the total amount owed was already too large to pay in a 13 so I didn't have a choice but if I could have converted or filed a 13 I would have taken that option in a heartbeat.

Don't feel that you are alone in this because I partially blame myself for completely trusting a man that took vows with me and turned out to be one of the worst human beings I've ever had the misfortune to be involved with. If an OIC is the route you would like to take, make sure your BK is closed prior to sending it because they won't talk to you until the case is closed.

Also, as far as the enrolled agent goes if you feel compenent in going to the IRS (and state) website to download the forms, you could pencil them in yourself and pay the agent a minimal fee to check everything before you send them off. I'm paying my agent to help me but I do most of the legwork and provide copies and anything else he needs to keep costs low. You might want to take some time to surf the IRS website to find out what's available to you.

I don't pass judgement on you because we are all here because we have financial difficulties so don't allow yourself to dwell on the past and try to get all the information you can possibly gather so that you can make the right decision now. So far I'm doing better than I was before BK and I know this tax issue can't last forever. If I can find the strength to get closure from this tax issue and the courage to battle it for the next 9 or so years, I will be able to get back to normal and will take advantage of that fresh start. Good luck and I hope everything works out for you.

I'm no expert and can only give you my opinions and info on what I've actually experienced. There are more knowledgeable folks here that can give you tons more insight than me. Hopefully they will chime in.

[southernbelle]

generally tax debts that are more than 3 years old can be included in your BK. I would recommend your contact a TAX attorney to clarify your situation (do not ask a different type of attorney- they are not experienced in everything) and try to ammend your BK filing.

Good luck

I found this information on the dischargeability of taxes, but I agree with jribe, make sure to ask your atty. Here's the link: http://bankruptcy-law.freeadvice.com...l_tax_debt.htm