Does bankruptcy eliminate tax liens? 11 Answers as of March 21, 2011

I am facing huge debt and almost no income. Does bankruptcy help with past tax liens, and what can I anticipate in the way of re-negotiations with debtors?

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Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
It can take of a lot of that. You need to see a lawyer so you get the best result in your bankruptcy because of these tax issues.
Answer Applies to: California
Replied: 3/21/2011
Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
In a Ch 7, tax penalties over 3yrs old are dischargeable. In a Ch 13, Taxes for years years where the return was unfiled or filed for less than 2yrs, taxes due within 3 yrs of BK, or taxes assessed within 240 days of BK are dischargeable.
Answer Applies to: Washington
Replied: 3/17/2011
Mankus & Marchan, LTD
Mankus & Marchan, LTD | Tony Mankus
Income taxes become dischargeable three years after they are filed; other taxes are not dischargeable. It's not clear what you mean "re-negotiation with debtors." I think you mean "re-negotiation with creditors." You would only need to re-negotiate with creditors of debts that are not discharged in bankruptcy. Your particular financial situation must be analyzed by a bankruptcy attorney.
Answer Applies to: Illinois
Replied: 3/17/2011
The Law Office of Mark J. Markus
The Law Office of Mark J. Markus | Mark Markus
Bankruptcy cannot eliminate a tax lien, but certain tax debts may be dischargeable and that would stop any liens from extending to post-bankruptcy assets.

There are several prerequisites that must be met before any tax can be discharged in bankruptcy. The minimum requirements for discharging federal or state/income taxes/ are (all of the following must be met): (1) it has been more than 3 years since the returns were last DUE (including extensions) to be filed, (2) the returns were timely filed _or_ it has been at least 2 years since the returns were filed, (3) there was no fraud involved or attempts to evade the tax, AND, (4) the taxes were not assessed within the last 240 days.

However, even if you cannot get rid of your tax debt fully in a Chapter 7 bankruptcy case, you may be able to discharge some of it, and enter into a more favorable repayment plan for the taxes than you otherwise could outside of bankruptcy in a Chapter 13 or Chapter 11 case.
Answer Applies to: California
Replied: 3/16/2011
The Law Office of John T. MacDonald Jr., PLLC
The Law Office of John T. MacDonald Jr., PLLC | John MacDonald Jr.
In most circumstances tax liens are not discharged in bankruptcy. However, it is important to seek the advice of a bankruptcy attorney on the specifics. If I can be of help please feel free to give me a call.
Answer Applies to: Michigan
Replied: 3/16/2011
    Burnham & Associates
    Burnham & Associates | Stephanie K. Burnham
    It depends on what the basis of the tax lien is. For example, if it is an IRS tax lien you cannot discharge this obligation. If it is a property tax lien then you can avoid it if you do not plan on continuing to own the property.
    Answer Applies to: New Hampshire
    Replied: 3/16/2011
    William C. Gosnell, Attorney at Law
    William C. Gosnell, Attorney at Law | William C. Gosnell
    Liens over 5 years old can be discharged.
    Answer Applies to: Tennessee
    Replied: 3/16/2011
    The Orantes Law Firm
    The Orantes Law Firm | Giovanni Orantes
    Once your tax debt reaches the tax lien point, you should consult a tax expert who can advise you how long the liens last. If the lien is still effective, it will survive bankruptcy. As for negotiating with your creditors, individual bankrutpcy does not involve much negotiating with your creditors (except for Chapter 11). The Court follows certain rules and a third-party is appointed to represent all the creditors as a whole. That person is called a "trustee." In Chapter 7, the trustee mainly ascertains whether there are unexempt assets to administer. In Chapter 13, the trustee determines how much, if any, of your income should go to your unsecured creditors and then distributes the amount you pay each month, if any, pro-rata. You really ought to consult an experienced attorney to assess your options.
    Answer Applies to: California
    Replied: 3/16/2011
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    If you are talking about income tax liens (IRS or Calif. Franchise Tax Board) then those are secured debts and the security is everything you own (minus some very limited exceptions under federal law as to federal income taxes or equivalent Calif. law as to California taxes). Generally, the answer is that you will continue to owe the amount secured by the liens. Chapter 7 is no help for that and Chapter 13 generally requires you to pay the amount owed including interest in the past and pay interest on the amount to be paid in the Chapter 13 plan. A federal income tax lien is valid for 10 years initially and it attaches to everything including retirement plans. You can try to work out a payment plan with the IRS or offer in compromise to settle the debt.
    Answer Applies to: California
    Replied: 3/16/2011
    Ferguson & Ferguson
    Ferguson & Ferguson | Randy W. Ferguson
    That question will require a long appointment with an attorney. The attorney you hire will go over tax liens and how they are treated in bankruptcy. What you do with debtors depends on the chapter of bankruptcy.
    Answer Applies to: Alabama
    Replied: 3/16/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    One they have become liens and attached to something, that is a problem. At some point you're probably going to have to negotiate (hopefully) something with regard to the lien issues.

    Should you wish further discussion, please call my office, my consultation is free.
    Answer Applies to: California
    Replied: 3/16/2011
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