Confused about taxes and filing claims

[southernbelle]

Could someone please explain to me if I am correct in assuming that if back taxes are considered unsecured or secured, it is still required for the taxing authority to file a claim to make the taxes non-dischargeable or are non-dischargeable taxes automatically exempt from discharge?

Is it possible for the taxing authority to file a claim for a lesser amount? Could filing a claim for a lesser amount be because the principal is secured, but penalties and interest aren't? Is there any negotiation during a Ch. 7 or is it all or nothing?

The reason I ask is because my atty. mentioned the fact that sometimes the local taxing authority doesn't bother filing a claim and the tax is written off, but I thought since this tax is unpaid business sales tax, it was understood that it HAD to be paid no matter what even without them lifting a finger to file a claim!! I plan to get further elaboration from him prior to filing, but thought I would ask here first.

Thank you again for tolerating my dumb questions.

[biotechsolution]

It will depend on whether you're filing a 13 or a 7.

If you are in a 13 they will file claims for taxes to make sure that priority or secured taxes are paid 100% in the plan even if the taxes are non-dischargeable.

If you are filing a no-asset chapter 7 there is no need to file claims for non-dischargeable taxes. Since they are not affected by the chapter 7 there is no need to file claims.

What you should do is get try to get from each agency what they consider is dischargeable and what is not. If you don't agree with what is dischargeable they your attorney will have to file a adversary proceeding to determine the dischargeablity of the taxes. Then the bankruptcy court will determine what is discharged and what is not.

The bankruptcy court will be by far the best place and the most sympathetic to dischargeability compared with taking your case to tax court. The bankruptcy court will still have jurisdiction.

[phoenyx]

Only personal income taxes have a chance at being discharged in a Chapter 7 bankruptcy. See the rules on this below. Taxes that are considered "trust" taxes such as federal withholding, FICA withholding (employee portion), state withholding, state sales tax, etc, are not dischargable in a Chapter 7 bankruptcy.

If a taxing authority has filed a tax lien against you, that becomes a secured lien on all of your property.

Taxes without leins that are not dischargable (principal, penalty, and interest) are considered "priority unsecured debts", meaning they get first dibs over all the other unsecured creditors.

Taxes without leins that are dischargable (principal, penalty, and interest) are considered unsecured debts, and get the same treatment that other unsecured creditors get.

For personal income taxes to be discharged in a Chapter 7 bankruptcy, the tax must be due on a tax return filed more than three years ago before the date of filing. Extensions do count, and push the date forward. Taxes on a tax return that was filed late, within two years before the date of filing may not be discharged. Additionally, taxes assesed in the 240 days before filing and taxes that are not yet assessed but are still assessable cannot be discharged in a Chapter 7 bankruptcy. Of course, if there was wilful fraud, the taxes cannot be discharged either.

When a Chapter 7 completes, there is a blanket discharge order issued. The court does not go through and list each item that is specifically discharged. You can't "slide-through" discharging a non-dischargable tax just because the tax authority fails to dispute your petition.

Chapter 7 does not give you any additional negotiation than you would have available without the filing. The IRS is generally willing to discuss payment plans, and in limited circumstances, offers in compromise. Penalties and interest, under certain circumstances, can be abated. I would strongly recommend reading the book "The IRS Problem Solver" by Daniel Pilla for more details on penalty and interest abatement.

In a Chapter 13 bankruptcy, non-dischargable taxes are also considered priority debts and must be paid in full.

[southernbelle]

Thank you guys so much. This new information helps me to understand exactly what remains after I file and what taxes will/won't survive a Ch. 7. Thanks again.

[Jooniper]

sorry wrong post!