IRS headache

[muzzey58]

We filed chapter 13 back in November of 2006. At that time I was working full time. When we filed bankruptcy our plan was based on both our incomes. I eventually had to quit work all together because of a the pain for a injury that I sustained while working as a nurse aide. I asked our first attorney to modify the court payments before we had our confirmation hearing. He refused to change the case and the plan was confirmed on the combined income. He also told us to list higher withholding allowances on our taxes. He also submitted the case with the higher withholding allowances. The next year my husband was looking over our financial records to see if we might get a small refund from the IRS. I ran the numbers and found out that we owed over $7000 to the IRS for 2007. We didn't have money left over to adjust our withholding allowances because of the court payments. We were paying 80%/$1600 a month to the court. We were barely able to buy food. I finally got fed up fired the first attorney and hired our current attorney. She immediately submitted a hardship modification to the court. The new modification was approved and our case was lowered from 80%/1600 to 55%/1100. That extra money allowed us to lower the withholding allowances. But we weren't able to lower the allowances until mid July 2007. We owed $4700 for 2008. We've tried to figure out how much exactly to lower our allowances but we still owed $1800 for 2009 with all the adjustments. The years 2007 and 2008 were placed on our claim record and were paid from our case. This year we received a bill for the outstanding taxes for 2009. Usually, the social security number would have indicated to the IRS that we are in an active chapter 13 and send to a Bankruptcy division of the IRS. For some reason it wasn't, now I had to send the IRS bill to my attorney to submit it back to the IRS bankruptcy office. It should be attached and paid off again to our open case. Has anyone else had problems like this with the IRS this year? According to what a another lawyer at my attorney's firm this has been happening with other chapter 13 clients. I know that it will be resolved. But is it that the bankruptcy court is overwhelmed because of a overload of new filings? Can I sue the first attorney for legal malpractice? I can't wait for this miss to be over! I will never open another credit card account and will probably rent the rest of my life. If I can't pay cash I won't buy it. Thanks for any help.

[Flamingo]

When was your modified Chapter 13 filed? Taxes and bills incurred and owed after filing are your own responsibility and cannot be included in your past filing. If you filed this modified Chapter 13 in 2009 it may be possible to include them in your filing. If you filed in 2008 you will have to work with the IRS to pay them off outside your Plan. The IRS considers a Chapter 13 Plan a payment plan and the IRS will not set up another payment plan with you if you if they are already included in your Plan. The IRS does not allow two payments plans at one time (we went through that). You need to first determine whether or not these taxes can be included in your filing if you filed your modified plan in 2009.

Since you fired your first attorney and hired a new one and there is probably a lot more information to your situation than you are disclosing, suing the former attorney for malpractice now could be difficult due to any statute of limitations, your hiring a new attorney and not filing a complaint as to your situation with your State Bar Association about the attorney, etc. Also oneself has to be prudent about their own financial situation and it could be stated you should have realized not enough was being withheld to avoid paying taxes for certain years. It can be difficult due to all the financial craziness going on but it is not difficult to run the numbers to see if a household is having enough taxes withheld to avoid owing a lot of taxes. Many people in financial hardships increase their withholdings to increase the amount of money in their paychecks and do not go back and reduce those withholdings when things improve lining them up for possibly owing taxes.

[HHM]

Just fyi

If you want more responses, try to break up your paragraph and shorten if possible. When people click on the forum and see one long, unbroken, chunk of text, most people are not going to read it, my self included

[memuzz]

I just talked with my second attorney today for close to 25 minutes about the case. She did find out that the entire amount owed for 2008 was put on as a claim on our case. She also has records that the claim amount was paid off on our case. She looked at my final discharge and it is clearly stated that the 2008 taxes were paid in full.

She contacted the local IRS solvency unit to look over our case to see if everything was paid off. There is also something strange on my claim as an IRS unsecured claim that nearly $3000 was paid off. I know my husband owed the IRS around $2500 when we got married. He was paying off the balance in monthly installment payments before the case was filed. He lost his job in 2002, the reason for the bankruptcy, and used his 401K to live on for nearly 2 years. He owed back taxes on the 401k.

In the paperwork that she emailed back to me, it states that the 2008 were completely paid off. The 2007 and 2008 back taxes were lumped together as a 100% priority claim. The combined payment happened after our case was modified in 2009. After 2009, we had figured out our taxes and didn't owe anymore to the IRS. The modification happened in June, so even if you owed money it was paid off. As my lawyer said today, you think you're completely finished with your bankruptcy and there's almost always some doo doo left to clean up afterwards. Even if we do owe money we can pay it off over a year or 2.

You don't play around with the IRS or any creditor. Credit is a privilege and cash is an asset.

Thanks for any help.

[memuzz]

On Thursday, the local IRS agent called my attorney. It turns out that any interest or penalties are not dischargeable. We have to pay the balance on our IRS claims interest in installments. The local office agreed to payments under $40 which we can afford.

As my attorney said, you can maybe see some light at the end of this bankruptcy tunnel. It has been a very hard going with this case. It was so botched up by our first attorney. One piece of advise I can give any current debtor or future bankruptcy debtor. Be very proactive with your case. Keep an eye on your case from the start to the finish. I put my entire trust into our first attorney and nearly had my chapter 13 dismissed because of the lack of communication by him to us. The mess with the IRS and us raising our withholding allowances so high that we owed money to the IRS. The problem with him letting the case be confirmed with both incomes even when I literally pleaded with him to remove my income. I had to stop working 6 months before the case was finally confirmed. I had injured my shoulder badly while working and have not returned to work since because of the pain in the arm.

We found a good lawyer who even after the case was discharged is still willing to help us in with advise. Finding a good lawyer is the first and most vital step in filing for bankruptcy. Getting a referral from the local lawyer referral service is where I found my second attorney. She came highly recommended. She was also a trustee at one time. A good attorney is willing to help you and not just take your money. I thank all who have advised me. I'm sure I'll be back here from time to time. Thanks.

[spidge]

Where was the trustee in all of this. This should have come out in the 341 meeting and could have been avoided. Remember the attorney works for you. They are like mechanics with the expertise to get done what you don't have the ability or desire to do.

I admit that I did not read your entire post, but it just stands out that the first attorney thought he only had to review the file once, make "his" decision about it, and that was that. Lazy comes to mind.

My attorney was great, but I will admit her aids were not when resolving issues I had with them. They acted like I had no clue what was going on, but I will admit that I tend not have the best choice of words. My taxes were doubled in my plan and the aid refused to rework the numbers. So I asked to speak with the attorney and she did not even have to come to the phone as I heard her ask why in the background and she pointed out the error immediately.

I still feel lucky though.

[LadyInTheRed]

We found a good lawyer who even after the case was discharged is still willing to help us in with advise. Finding a good lawyer is the first and most vital step in filing for bankruptcy. Getting a referral from the local lawyer referral service is where I found my second attorney. She came highly recommended. She was also a trustee at one time. A good attorney is willing to help you and not just take your money.

That's worth repeating.

My attorney was great, but I will admit her aids were not when resolving issues I had with them. They acted like I had no clue what was going on, but I will admit that I tend not have the best choice of words. My taxes were doubled in my plan and the aid refused to rework the numbers. So I asked to speak with the attorney and she did not even have to come to the phone as I heard her ask why in the background and she pointed out the error immediately.

A good lesson for everyone. If you are dealing with non-attorney staff and what they are telling you doesn't make sense, ask to speak to the attorney. Some attorneys have staff members preparing petitions that are so experienced and knowledgeable that they help train the new attorneys. Others are secretaries filling out forms without much knowledge of law, whether they know it or not. Many fall somewhere in between. It is the attorney who has ultimate responsibility to represent the client and nobody should hesitate to tell a staff member that you'd like to talk to the attorney.

I am a paralegal in a different area of law. I am one who young attorneys come to with questions. My boss often says that he considers my work to be of "attorney quality". Regardless of my experience and knowledge that comes with it, I am never offended when a client asks to speak with an attorney. In fact, when a client doesn't sound satisfied with my answers, I insist on it. If you are faced with a staff member who doesn't have that attitude, that's their problem. They could be 100% correct. But, you have the right to talk to the attorney for confirmation and/or further explanation.