IRS nightmare

[muzzey58]

Has anyone heard of the new laws concerning IRS debt?

My husband and I have been in an active chapter 13 bankruptcy for 4 years almost. Our original attorney messed up our case pretty bad. He had our case payment plan based on higher withholding deductions. Because of this we owed over $6700 in 2007. We then fired him and hired a new attorney. Our new attorney petitioned the court for a modification in 2008. However, because we were barely living we couldn't adjust our withholding allowances until after the modification was enforced.

We adjusted our withholding allowances but still owed $4200 for 2008.
The back money went onto our claim and was paid out of the plan.
This year, we barely owed $1300 in taxes to the IRS. We received a letter for
a bill for that amount. I contacted the IRS this morning and the representative said that there was a new law that forbids IRS back taxes to be placed on open chapter 13 cases.
She said that she is going to try to have our case dismissed on the grounds of incurring new debt. I never heard of the new law at all. I wasn't informed by my Trustee, attorney nor the bankruptcy court. We pay our claim regularly and have never been late. We live within our means and follow the rules.

But I think that this is ridiculous. Only 25% of chapter 13 cases make it to the end. Now with these laws it will make the success rate even lower. I have contacted my attorney just waiting to hear what she can do.

Has anyone else been affected by these new laws?

[newbie2]

Has anyone heard of the new laws concerning IRS debt?

My husband and I have been in an active chapter 13 bankruptcy for 4 years almost. Our original attorney messed up our case pretty bad. He had our case payment plan based on higher withholding deductions. Because of this we owed over $6700 in 2007. We then fired him and hired a new attorney. Our new attorney petitioned the court for a modification in 2008. However, because we were barely living we couldn't adjust our withholding allowances until after the modification was enforced.

We adjusted our withholding allowances but still owed $4200 for 2008.
The back money went onto our claim and was paid out of the plan.
This year, we barely owed $1300 in taxes to the IRS. We received a letter for
a bill for that amount. I contacted the IRS this morning and the representative said that there was a new law that forbids IRS back taxes to be placed on open chapter 13 cases.
She said that she is going to try to have our case dismissed on the grounds of incurring new debt. I never heard of the new law at all. I wasn't informed by my Trustee, attorney nor the bankruptcy court. We pay our claim regularly and have never been late. We live within our means and follow the rules.

But I think that this is ridiculous. Only 25% of chapter 13 cases make it to the end. Now with these laws it will make the success rate even lower. I have contacted my attorney just waiting to hear what she can do.

Has anyone else been affected by these new laws?

I think you may be misunderstanding what the IRS spokesperson told you. In a nutshell: Any new debt you incur after your date of filing is your responsibility to pay for in full. Withholdings should have been adjusted immediately after you realized that you were going to owe the IRS money (the first year this happened.) You owed the IRS for 3 years after your date of filing if I'm reading your post correctly. The first year can be understandable as things are being juggled around so to speak. The next years IRS debts are because you didn't adjust withholdings or seek the modification of your plan earlier to account for the added tax liability.

Let us know how this works out for you please. Good luck.

[muzzey58]

In 2007, we attempted to contact our first lawyer every day for 2 weeks with no response at all from him. I sent him 3 certified letters, dozens of emails with no response at all from him about the IRS problem. I finally called our local lawyer referral line to seek out help for our case. The agent told me to basically call around to different bankruptcy lawyers and see if any were willing to take our case.

One attorney, our current one, asked permission to look over our case. She called me back in July of 2007 to speak to me. She said that our case had numerous filing errors and wondered why the attorney filed the petition when I wasn't working anymore and wouldn't file for modification. She gave me some advice. I wrote the head partner of the law firm of our first lawyer. She said we were rude to her associate. I then decided to call back my current attorney for help and fired the first attorney. My new attorney immediately filed for a modification. We were living with about 50 dollars left after every paycheck. After the modification we decreased our withholding allowances, but would still owe for 2007. It took almost 2 years and thousands of dollars lost to get our case in a good position.
I have already looked over our anticipated tax return for 2010 and it looks like we'll get back $100!!!!!!! Yippee, finally. We'll be out of bankruptcy also in 2011!! Big Yippee!
As I've said before, no credit cards ever for this family. Only cash!
Thanks for all your help.