Post-bankruptcy tax liens / IRS and FTB / Insolvency procedure...

[quest42]

Questions about settling tax liens that survived my bankruptcy:

Filed Bankruptcy in October 2005 (pro-se).

Personal assets under $5,000 (all declared as exempt.)

Unsecured priority claims (Schedule E)

My 1998 and 2000, tax returns were NOT filed prior to bankruptcy:

... IRS lien, tax and penalies due, about $60,000.

... California FTB lien, tax and penalies due, about $5,000.

Post-bankruptcy settlement offers:

IRS and FTB say pre-bankruptcy liens are enforceable against pre-bankruptcy assets.

FTB offered to settle $5,000 lien for $1,200.
... (already done)

IRS offered to settle $60,000 lien for $3,000.
... (IRS has accepted, will do it this week.)

Questions:

IRS and FTB made tax assessments based on W-2, 1099, and other records.

Do I still need to file 1998, 2000 tax returns? (Records missing, lost.)

OR, can I just settle the tax assessments as post-bankruptcy offers, and be done with it all?

Would filing 1998, 2000 tax returns re-open a new case, or will the post-bankruptcy settlement close these debts?

Even if I owe less than the ($60,000) tax assessments, could I get any refund? Probably not... so, why bother?

My current income is unpredictable, from part time, temporary jobs, less than $2,000 per month.

I can borrow $3,000 from a relative to settle with IRS, if it is advisable.

Any suggestions?

[Minnymouth]

These are questions that you need someone who is qualified to answer for you. I don't believe anyone on this forum should advise you on this as it is a very complicated issue.

Best suggestion I can offer is talk to an IRS division that deals with people in bankruptcy that owe past IRS bills.

I'm sure they have reps that can help you in this area.

Good LUck

[lrprn]

Quest,
Your situation sounds complex enough that it would be a good idea to get some reliable advice from an experienced bk attorney or tax attorney. I'd start with a few attorneys that specialize in bk in your area - most give a free half-hour to hour consultation.

It's too bad you didn't file your 1998 and 2000 tax returns two years before filing bk, because if you had, from what you've told us there's a good chance that both years' taxes owed would have been dischargeable in your Ch 7 - see #4 below:

From the Nolo website at http://www.nolo.com/article.cfm/Obje...3/161/176/ART/ :

"You can discharge (wipe out) debts for federal income taxes in Chapter 7 bankruptcy only if all of the following conditions are true:

1) The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy.

2) You did not commit fraud or willful evasion. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, such as using a false Social Security number on your tax return, bankruptcy can't help.

3) The debt is at least three years old. To eliminate a tax debt, the tax return must have been originally due at least three years before you filed for bankruptcy.

4) You filed a tax return. You must have filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.

5) You pass the "240-day rule." The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet. (This time limit may be extended if the IRS suspended collection activity because of an offer in compromise or a previous bankruptcy filing.)"

Keep us posted on what happens and good luck!