A twist on the modified Chapter 20

[southernbelle]

I went to my atty's office today to make another small payment and to turn in more paperwork(still waiting for my tax refund that was supposedly mailed today) and he said something interesting. I asked a couple of questions about the trust fund taxes and he said that a Chapter 7 can be filed and discharged then a non-dischargeable Chapter 13 can be filed as a type of Offer In Compromise for the priority taxes. I asked him if it was mandatory to submit a plan to pay all priority debt at 100% to get a non-dischargeable Chapter 13 plan confirmed. He said, yes, that's normally true but the court wouldn't be able to object to the plan since I'm not seeking a discharge and I'm only seeking the protection of the court to allow me the opportunity to repay the debt. He also said, that the only entities that could object would be the creditors and I would be able to submit the plan with the disposable income I have available as opposed to paying back at 100%. (I hope that made sense) He said I could ask them to accept the amount of the plan and if they didn't I could just withdraw the BK and I'm back to square one with the taxes.

Wait a second, I thought the Chapter 13 (no matter what the circumstances) had to account for 100% of the taxes I owe. I was prepared to get a second job to avoid tax liens and wage garnishments, etc. I don't get it, but he seems very knowledgeable and has handled plenty of bankruptcies, but he did say this would be the first time he tries this. This seems like unchartered territory! Lucky Me!

I don't know what to think of this and, of course I'm skeptical. My other suggestion was to get a 2nd job to afford a chapter 13 now (I don't make enough to pay back the taxes 100%) to avoid having 2 BK's on my credit report, but he said that it's best to get the dischargeable debt out of the way (over $100k) then deal with the taxes. He also said that I have options to deal with them directly, but I'd prefer to not have to deal with accumulating penalties and interest which could double the amount I owe in the amount of time left to collect. I suggested getting the 2nd job now and he told me that because of my current salary and with the normal debts I have and normal monthly expenses, it would be a small chance of getting the plan confirmed.

I will probably submit an Installment Agreement on Monday since they sent the Intent to Levy letter and I'm afraid that they will attempt to levy my bank account or file a tax lien VERY SOON which might make this conversation moot!!!

Does anyone have any thoughts on how willing the IRS is to file a tax lien? Should I just say bye bye to the anticipated refund ($3500) and just file by borrowing money to get ahead of the tax lien? Since the installment agreement asks for bank information which usually has just enough money to cover my bills each month and I'm about 2 weeks away from filing, would it be okay to open a new account for my direct deposit paycheck and give them the present account info or just leave well enough alone? I don't trust the IRS AT ALL and I'm just trying to keep them from raiding my account and leaving me high and dry.

[rrockinggramma]

The IRS will just levy and talk later. I would file to stop it all asap and then figure out the next step. As non of the taxes are dischargeable, perhaps after bk7 discharge, you should talk to one of those tax attorney's that can "settle the debt" with the IRS? good luck.

[southernbelle]

Thanks Gramma. You've got me thinking about the disadvantages of waiting for that refund check vs. dealing with the IRS before filing. It's hard to give up on $3500 when I'm so close, but I might just do that and file Mon. or Tues and let the check go to pay creditors.

[southernbelle]

Here's an update. I just checked the IRS website again and the message said:

Your refund may be reduced to pay a past due obligation such as child support, another federal agency debt, or state income tax. If this applies to you, the Financial Management Service, who issues IRS refunds, will send you a notice informing you of any offset they have made. The details of the debt are not provided to the IRS. Please do not call us to inquire about the details because we will not be able to answer your questions. Instead, direct any questions you have about the offset or debt to the agency identified on the notice.

Seems like I don't have to keep waiting for that imaginary refund that was coming. I'm trying to borrow the money now so that I can file as soon as the bills I just paid online clear my account.