How does one know if older taxes are dischared?

[bornfree2]

In my research I am learning that older taxes (past 3 years and if return filed) qualify for dischargeability. But how does one qualify for this and know if it is applied? Do you merely list the IRS debt, note its year, then attach some kind of documentation that a return was filed for that year? (tax transcript or copy of that return). Is further communication with Trustee required?

Does the IRS then send you a notice that the past due amount is 0? How does one know it all goes through?

[justbroke]

When filing bankruptcy you fill out the schedules, and hopefully correctly. Unsecured debt goes on Schedule E or Schedule F.

Schedule E is for "priority" unsecured debt which includes non-dischargeable IRS debt. Schedule F is for all other unsecured debt.

The IRS is very good at determining that dischargeability of tax debt, but the same rules apply. The 3/2/240 rule is used to determine whether or not the tax is dischargeable and discharged.

If you file Chapter 7 and even if you don't fill out the forms correctly, simply call the IRS Insolvency Department after discharge to ask them what would be discharged along with the status of your tax account.

[bornfree2]

In the case a tax bill is not dischargeable, and the trustee finds non exempt property, does the trustee sell off the property to pay the bill directly or debtor given option to setup a plan with IRS? Im assuming since its 'liquidation' the secured folks will get paid first by the trustee and debtor is not given that option.

[justbroke]

If it's non-dischargeable IRS tax debt, then it is what is called "priority unsecured" debt. The Trustee would use proceeds to pay debts in this order: administrative (e.g. trustee fees, cost of administering the estate, etc), priority unsecured, secured, and then general unsecured. Now there are some nuances and the levels within each type can get interesting, but suffice it to say that is the order.

Secured creditors are paid after the priority debt, unless you surrendered the property and they filed an unsecured claim (or reserved a portion of their secured claim as unsecured and updated the claim... a bifurcated claim).