Bankruptcy and the IRS: How Does Uncle Sam View Your Tax Debt?

[laz]

[CATCHMEIFYOUCAN]

Federal Taxes Due

Chapter 13

"Under this form of bankruptcy, designed for wage earners "with regular income," you agree to a plan to pay off your debts over a period of time, usually for pennies on the dollar.

Under this kind of bankruptcy, the court has the discretion to discharge taxes owed to the IRS without regard to the three-year rule, so long as you complete the payments under your Chapter 13 plan.

Even the IRS doesn't mess with the bankruptcy courts. When the courts say the tax is discharged or impose an automatic stay against collection, that's it. It's over."

Question: My plan is due to be confirmed next weekend, and I have a feeling it's going to be a whopper. I know that I will still owe on Federal taxes due to working two full time jobs and having early 401k withdrawals, I figure I'll owe about another 2grand. (even though i claim Zero on federal and state and have them take additional money out toward my taxes). I know I wont be able to pay my back my federal in full, how does this fall into place with my bk13? i will get a small chunk back from state (like 600 - even if that) but i know the trustee will take it

catchmeifyoucan

[AMISLANDER]

I've got some similar issues...

...but am taking it one catastrophe at a time...IRS says I owe for 2004...up to 7K right now...sent refund to trustee of $3K...don't know what I'm getting back, if any & IRS was alerted that the refund went to trustee....who knows...$7K is better than $50K!

[ch13buyout]

Chapter 13

I know I wont be able to pay my back my federal in full, how does this fall into place with my bk13?

catchmeifyoucan

This is not intended as legal advice. Please contact your lawyer for any legal questions you have.


Taxes & IRS are considered involuntary debt and are treated differently under the bk law. Which means, you may be eligible for a cram down. The new bk laws did not change treatment of taxes & IRS issues.

However, if its 2004 IRS debt only, they have a claim because it does not fit the rule. If its an accumulation of taxes with the most recent being owed for 2004, then you can try for a cram down.

[CATCHMEIFYOUCAN]

Irs

Oh, I don't owe any back taxes, I'm just worried about taxes this year. If the Trustee takes all my "disposable," income it leaves me saving near to nothing, and I have no way of paying my taxes on time to the IRS (unless I get a little help from my s.o.). I think my tax issue is not even part of my Bk. Sorry for misleading.

Catchmeifyoucan

[anonymuse]

Oh, I don't owe any back taxes, I'm just worried about taxes this year. If the Trustee takes all my "disposable," income it leaves me saving near to nothing, and I have no way of paying my taxes on time to the IRS (unless I get a little help from my s.o.). I think my tax issue is not even part of my Bk. Sorry for misleading.

Catchmeifyoucan

Change your withholdings so that you don't owe anything and make sure the correct income is reported to your plan.