What Happens with a Tax Lien Reporting After Chapter 7 Discharge?

[casablanca]

I have recently filed for Chapter 7 Bankruptcy. Included among my dischargeable debts is a sizeable amount for Federal Taxes. The IRS filed a Tax Lien in 2007. We do not own any real property. It's my understanding that, though the tax liability will be discharged, the tax lien will remain and would attach to any real property we might have owned prior to our bankruptcy - not a problem. I also have read that unpaid tax liens will stay on your credit report forever, and I'm wondering how this tax lien should report post-discharge? Technically it will not be satisfied, so will it stay there forever? Thank you for any input.

[AngelinaCatHub]

Not being a CPA, I'll try my best. Taxes are not normally discharged with rare exception. (three year s.o.l.). I believe you are stuck with the lien and whether they reported it or not, would not change anything in your bk as it is a tax instrument not dischargable. As far as the credit companies. I don't know nor do I care for myself as I would not worry about credit after my bk, but that is my own opinion. I don't know it your answer. Hope in a little way, this helps. 'Hub

[despritfreya]

The tax lien attaches to ALL property, not just real estate. The value of the lien is based upon the value of your unencumbered property on the petition date. For example, let's say you owned a vehicle that you owe money on and that vehicle is upside down, the tax lien would not attach since there is no equity in the vehicle. But let's say that same vehicle has $1,000.00 of equity. The tax lien would attach and, if you owned nothing else, would be worth $1,000.00.

In most cases consumers have personal property with some, but not, a lot of value. So if all of your property listed in Schedule A and B of the bk docs adds up to $3,000.00 (equity) then the tax lien would be worth $3,000.00. If, but for the tax lien, the taxes met the rules for being discharged, you would discharge all but $3,000.00 (the value of the lien).

If you have an attorney, he or she will contact the IRS and get an agreement that only "x" amount will survive the bk. If you do not have an attorney you need to make the contact with Special Procedures. Send it a letter with a copy of Schedule A, B and D. Confirm with Special Procedures that it will agree that the value of its lien is "x" and that any amount over "x" is discharged. The IRS may not respond until the entry of the discharge so make sure you follow up with phone calls. Once you have confirmation pay off “x” and get a lien release.

Des.

[casablanca]

The tax lien attaches to ALL property, not just real estate. The value of the lien is based upon the value of your unencumbered property on the petition date. For example, let's say you owned a vehicle that you owe money on and that vehicle is upside down, the tax lien would not attach since there is no equity in the vehicle. But let's say that same vehicle has $1,000.00 of equity. The tax lien would attach and, if you owned nothing else, would be worth $1,000.00.

In most cases consumers have personal property with some, but not, a lot of value. So if all of your property listed in Schedule A and B of the bk docs adds up to $3,000.00 (equity) then the tax lien would be worth $3,000.00. If, but for the tax lien, the taxes met the rules for being discharged, you would discharge all but $3,000.00 (the value of the lien).

If you have an attorney, he or she will contact the IRS and get an agreement that only "x" amount will survive the bk. If you do not have an attorney you need to make the contact with Special Procedures. Send it a letter with a copy of Schedule A, B and D. Confirm with Special Procedures that it will agree that the value of its lien is "x" and that any amount over "x" is discharged. The IRS may not respond until the entry of the discharge so make sure you follow up with phone calls. Once you have confirmation pay off “x” and get a lien release.

Des.

My attorney has filed an adversary complaint for the taxes included in the bankruptcy. All but one year meets the eligibility requirements for discharge. So basically we just have to wait for the IRS to answer, and go from there to get a payoff amount, pay that, and then the lien (including the amounts that were discharged) would be released, allowing them to age off of our credit reports eventually? I'm just hoping that we don't have to go through all of the difficulties of the bankruptcy, only to have an 80,000 tax lien remain on the credit reports forever.

[pris72]

My tax lien is still at the top of my credit report, even though it was paid off in 2003 by my ex husband. I have tried for years to get the sorry state of Ga to atleast change it to ZERO under the balance owed, but they won't do it. How many years can they legally stay on your credit report? My attorney told me that tax liens and owed child support are 2 things which can not be included in a chapter 7, and that they do survive the discharge.

[justbroke]

Tax liens are no joke. As Des writes, work with your attorney and have the tax lien re-valued.

[df04527]

Pris -- 2003 it was paid? It will drop off this year. Tax Liens are generally 7 years from the date PAID!!!! not file date. They are very evil.

[URODOC]

Des:
I am currently in a Ch 7 with the majority of debt non-consumer. I am a high earner. Much of the debt is tax related and about 50% is eligible for discharge.
It is my understanding that the liens that were filed by the IRS on my property will never go away unless paid in full.
This leaves me very confused regarding your statements that the lien can be "devalued" by the amount of equity on the date of filing. In this case, I should have the lien decreased by the amount discharged, right?
If not, what do I really owe the IRS?
If I had 100k discharged and still owe 50k and the 150k lien is still on the property can they go after me for the 150k? that would radically change any payment plan I could make.
Also, do interest and penalties accrue on the original 150k, or the 50k?
Further, if the house were sold now with no equity, would the IRS go after me for the 150k?
It is my understanding that only in Ch 11 can IRS liens be "stripped". This apparently was based on a FLA or US supreme court decision in a Ch 13 case.
My question is really about what the point is of having the personal taxes that can be discharged in Ch 7 discharged, when they really can't?
I have not discussed this with my attorney yet.
As an aside, this would seem to be prejudicial against anyone who owns real property.
Do you have any concrete proof that what you say is true regarding an agreement with the IRS (why would they agree to anything?) or is this just anecdotal?
I can understand the IRS's point, because if at some point the property increased value they would get more therefore, why wouldn't they wait?
Sorry for the rambling discourse, but it's complicated and I can find no real answers.
Thanks

[despritfreya]

URODOC,

This all depends upon what years have liens attached to them. If they are dischargeable years that portion of the liens, up to the value of your property, will survive the bk. The balance of the tax will be discharged without the need to lien strip since the lien is only worth the value of the property. This is where communicating with the taxing agency's bk department comes into play. The agent in that department will know how to deal with this.

If the liens are associated with non-dischargeable tax periods then the liens will pass through the 7 bk discharge unaffected since the underlying debt is not discharged. Make sense?

If you had initially filed a reorganization (11), you would have dealt with the liens exactly the same way as above but you would have a forced repayment plan (forced upon the govt.) for the amount of the secured claim AND the amount of the priority claim (relegated to an unsecured status based upon the value of your property) no matter if the taxes were old enough to discharge. You would not have had to file for a 506 determination as to value unless there was a dispute over the value of some asset you had. The taxing agencies typically look at your Schedules and agree to the values you have placed on your assets as it relates to the amount of their secured claim.

Hope this helps. If not, feel free to ask anything else and if I can shed light on the situation I will be glad to attempt to do so.

Des.