You owe taxes to the Irs (IRS). To make matters worse you find out the IRS has actually put a tax lien on your residential or commercial property with the county recorder's workplace. What can you do? Is the tax lien dischargeable in personal bankruptcy?

Under 11 U.S.C. A A 507 and A 523, the list below taxes are dischargeable in bankruptcy if:

1) The return was last due at least 3 years prior to the insolvency petition was submitted;

2) The tax claim was assessed within 240 days prior to the date of the filing of the petition;


a) If you have requested a deal in compromise related to the tax you are trying to release, the time it takes the Internal Revenue Service to think about the deal in compromise is not counted towards the 240 days. In fact, the IRS adds another 30 days on top of the time it takes for the IRS to make a choice. This implies that if you sent an offer and compromise to the IRS and they turned down the offer in compromise 3 months later, the 240 days assessment duration does not consist of the 4 months (3 month consideration duration plus an extra one month).

b) If you have submitted a previous insolvency case, the 240 days assessment duration does not consist of the time you remain in personal bankruptcy and it adds another 90 days on top of that time. So if you submitted for a Chapter 7 insolvency case previously and it was closed 3 months later on, the 240 days evaluation period does not consist of the 6 months (3 months in personal bankruptcy plus an additional 90 days).

3) The tax return was submitted more than 2 years prior to the insolvency petition was submitted;

4) The income tax return was not deceptive or there was no willful attempt to evade the tax.

These rules do not use if there is a tax lien positioned on your residential or commercial property. A tax lien is not dischargeable in personal bankruptcy. If you own real estate the Internal Revenue Service may tape-record a tax lien on the title. If you do not own any real estate, the Internal Revenue Service may place a lien on all your individual residential or commercial property.

If You Own Real estate

If the tax lien was tape-recorded on your real estate, your personal commitment to pay the financial obligation might be eliminated in the insolvency if the income taxes satisfy the rules listed above. Nevertheless, even though your individual liability is released when filing bankruptcy the tax lien would stay tape-recorded versus your property up until the tax lien is released. This indicates if you attempt to offer your home when the tax lien is still taped against your property, you will need to settle the IRS lien in the sale of your house.

If You Submit Chapter 7 Bankruptcy and You Do Not Own Real estate

If you do not own any real estate in a Chapter 7 insolvency then the tax lien only connects to your personal effects. Your obligation to pay the tax financial obligation might be erased in the insolvency case if the income taxes satisfy the rules above. Nevertheless, the tax lien would still survive the personal bankruptcy and the lien stays taped against all the properties you have actually owned on or before the date your bankruptcy petition was submitted. Thankfully the IRS can not go after earnings century law inc consolidation program or possessions you get after the date you have actually filed for personal bankruptcy protection. They can only go after the assets that you have actually owned prior to declaring insolvency. This suggests the Internal Revenue Service can only reclaim the furnishings or cars that are paid completely or other individual properties you have owned prior to the insolvency filing. Chances are the IRS will most likely not concern your door to collect your 20 year old sofa because it would be a wild-goose chase for the Internal Revenue Service. The Internal Revenue Service may potentially pursue your retirement prepares also considering that the retirement plans were left out from the personal bankruptcy estate. However, they can not go after your retirement plans till you retire and are qualified for retirement earnings. By that time, the tax lien may have ended.

If You File Chapter 13 Insolvency and You Do Not Own Genuine Residential or commercial property

So what takes place if you remain in a Chapter 13 personal bankruptcy plan and you owe earnings taxes for both 1) tax years that would have otherwise been eligible for discharge if the guidelines above are fulfilled and 2) current tax financial obligation that is not eligible for discharge? In a Chapter 13 insolvency case, your recent tax financial obligation is considered a priority unsecured debt, and they must be paid completely through your Chapter 13 bankruptcy plan. The other income tax debt that would normally have been eligible for a discharge however for the tax lien is protected approximately the quantity of properties owned which amount requires to be paid in full through the Chapter 13 plan (for example, if you have $25,000 of personal effects, including vehicles, bank accounts, furniture, etc., then the $25,000 would need to be paid in the Chapter 13 strategy in addition to the priority unsecured debt). The staying tax financial obligation from the tax lien is treated as an unsecured debt that is discharged in the bankruptcy, however as suggested above, the tax lien still makes it through the bankruptcy. For that reason the staying tax debt subject to the tax lien is dealt with the same as in the Chapter 7 bankruptcy case above. The Internal Revenue Service will still retain the IRS lien on your personal property however they can not go after income or home you acquire after your personal bankruptcy case was filed.

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