Yes - Back Taxes are Dischargeable

[TheDouble]

I am surprised how many people I have talked to don't realize that back taxes are dischargeable in bankruptcy providing certain time conditions have been met. (Look it up or consult with your attorney.)

The "good" thing about my Chap 7 is that approx. 90% of my debt was "Non-Consumer" debt ($70k in back taxes, $10K in consumer debt) and therefore many of the rules applying to consumer debt bankruptcy do not apply under section 741b, i.e. the "means test".

My first attorney kept telling me that the only way out was a Chap 13 - but thank The Lord, I sought a 2nd opinion and got a great attorney who investigated the matter and and now I have 26 days to wait until discharge - (fingers crossed) - and so far no objections.

Of course, one overwhelming factor in my case is that I have very few assets, no real property, no investments, etc. The only thing the trustee could pick on are some older project vehicles I own - I had valued them all at around $8k, the trustee came back with $11.6K - so I am giving him one of the vehicles to bring the amount back down to $8k which I will possibly get a 15% discount if I can come up with the money to pay the trustee within 30 days.

The trustee at my 341 made the comment "Well, you should have filed an Offer in Compromise with the IRS". I replied "I did file one, sir." His reply "And it got rejected, right?", Me: "Right.", Him: "Of course! They hardly ever accept them." I spent many many wasted hours filling out forms and providing supporting evidence and documentation concerning my hardship case (wife battling cancer, both of us unemployed, no health insurance, etc), only to be rejected by the IRS and ultimately having to deal with it by filing bankruptcy - now the IRS will get even less money than I offered in the compromise.

If you are dealing with back taxes, be sure that your attorney is well versed in the matter. My first attorney had no clue, the 2nd is extremely knowledgeable and has just the right mix of aggressiveness and confidence. I don't know what I would have done without him. It might behoove you to investigate the timing conditions for discharging back-taxes and stall off filing bankruptcy until you have met them all. You have to strategize - sometimes you need to do something right now, other times you have to wait, etc.

I have spent many many sleepless nights and endless discussions with my wife, worrying sick about these back taxes and the threatening tactics of the IRS, for the past 5 years or so and now, finally, it looks like relief is in sight!

God Bless and keep the faith - pray for a positive resolution. God has a way of working things out for the best, even though it may not seem like it at the time. ;-)

[freshstart06]

Yes, my husband is getting is back taxes discharged. We tried to get an offer of compromise but we could not afford it, it would have cost us almost $2000 to consider. We don't have any money for that.

[Granny]

Offers in Compromise

I'd like to add another note about Offers in Compromise, for the benefit for newbies who may be considering this as an option instead of bk.

An Offer In Compromise adds one year plus the time the offer is under consideration, which is generally about six months to the IRS statues of limitations for collection, for a total of about 18 months.

The documentation required for an OIC is twice that required for bk.

If you have to pay taxes in a bk, you only pay the tax, all interest and penalties are listed as an unsecured debt. In an OIC, you pay what you pay, irregardless if it is tax, penalties or interest. This could be the full amount you owe on any of those 3 or just a partial amount. They want as much as they can get. It's not divided into classes as it is in a bk.

In most cases, if taxes are your biggest debt and if they are not dischargeable, you most likely would still be better off with a bk because you are not going to pay any interest. Second choice, would be an installment agreement for as along as it takes to let the statue run out.

Sometimes this means the tax debt just continues to climb, because you can't even pay the full interest each month, but that statue clock is still ticking, and that's what counts. If those taxes can't be discharged, you really don't want to do anything to extend that statue of limitation clock. An installment agreement does NOT extend the statue for collections.

Lastly, as stated in the first message of the thread, if your case involves taxes, make darn sure your attorney is well versed in tax cases. I've seen too many bk cases that should never have been filed because the attorney didn't understand how it worked with the IRS or he/she ill advised his client. With the new BK laws, this is too important to let somebody get it wrong.

[possumfat]

Would "public trust" or sales tax you collect from operating a business qualify for discharge under the old or new BK laws ?

[wrktwoliv]

You are so right 'The Double'

I had the same experience you did.

I was stupid enough to listent to my 1st attorney and started a chapter 13 at over $1000 month for 8 months until with enough reading managed to dismiss first my attorney and then my chapter 13.

I refiled under a chapter 7 pro se. DIdn't file any means test. Didn't have any real assets (no asset case) even though I was positive in my schedules +100 and had private school tuition in the schedules at 9K a year I had no problems.

Was discharged 6/26/07 and closed the same day. Over 250K in state and federal taxes combined. I tried an OIC with both the IRS and State for 4 years, complete was of time. I was willing to pay what I owed but they wanted years that I didn't even owe for.

Research is key. Know the asessment date and previous cases. I just this week managed to get my 2 federal liens removed because they were filed in ithe wrong county. The liens will survive a Chapter 7.

Now my last major decision is to file against my 1st attorney in small claims court for the 3750.00 the trustee paid him and the 1500 I paid him. He advertised has a expert in tax bankrputcy. I don't care about the money but my life was completely turned upside down during the chapter 13 process. My new employer found out about it because they had to start a garnishment for the trustee payment.

[freshstart06]

My goodness, wrktwoliv, for this reason I filed pro se. I have no assets and I am hearing too many terrible stories about using lawyers. It is like they are starting to force people into chapter 13 that don't need to be there nor can afford to do chapter 13. $1000 a month is way too much to handle, I don't know how you did it and maintained your living expenses. I think lawyers are good if you have major assets but for us without assets, pro se is the way to go.

[butterfly57]

I know this is an old thread but I have met with 3 different attorneys over the past 3 years (met with a female atty yesterday). The first two attorneys advised Chapter 7, the female yesterday first suggested Chapter 7 but uponing realizing I have 2 tax liens (one with the IRS and one with the state of NC, the state filed one year before the IRS and froze a bank account). But, she turned the tables on me upon hearing I had "tax liens". She said if there weren't tax liens a chapter 7 would be the way to go but the tax liens changed everything in her opinion. She feels Chapter 13 would protect me but she also is quoting figures of monthly payback for 3 years anwhere between $88 to $300 or possibly more. I told her that could be a real issue for me as I work part time and my husband is disabled. I owe about $100K in tax debt, very minimal CC debt ($4,000) and some medical debt ($800). I have one asset a vehicle that is ten years old that we took a personal loan out on 8 months ago because we have been so broke and needed to pay for car repairs and dental procedures. So it's a mess and very confusing with the conflicting info. from the attorneys. The female attorney said that with Ch 7 I'd have to pay the trustee whatever figure he/she came up with right away. With a ch 13 the payments, including her fee, would be spread out. Her fee I might add is double for the Ch 13 vs the Ch7.

[justbroke]

Please revisit the forum rules regarding re-opening old threads. In these cases, always open a new thread, as the laws and precedence may even have changed over such a long period of time.

This thread is almost 7 years old. Additionally, you are getting some excellent help in the other threads.

I am closing this thread solely for administrative reasons.