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Bankruptcy Law/Bankrupt and Taxes

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Expert: - 5/6/2009


Question
I filled back taxes on May 2007.  I got a strong payment plan that I had been paying every month since December 2008.  (I owe about 50K).  The IRS increased my debt a year ago after internal auditing but that was included on the payment plan that was set up on December 2008.  If I go bankrupt in the future can I pay the taxes under the bankcrupt?  What are the requerements to get them discharg or penalties abated?

Thank you

Answer

Leon Bayer
Let me give you some general reading on this from my Bankruptcy Guide at http://www.debt-relief-bankruptcy.com/faq-browse11-14/bankruptcy-guide.asp and recommend you see an expert bankruptcy lawyer right away for guidance.

Income Taxes owed to the United States or any state, county, or other governmental entity are normally nondischargeable, however, income taxes will discharge if all of the following criteria are met:

The taxes are more than three years old at the time the Bankruptcy was filed. (The three-year period begins to run from the time the returns were due, plus any periods of extension);

If the return was not filed on time, more than two years has expired since the return was filed;

If there was an assessment, more than 240 days have expired from the date of the assessment before the bankruptcy is filed;

There has been no fraud.



Caveat: If you intend to discharge taxes with your bankruptcy filing, we recommend that you obtain a complete history of your tax obligations for each specific year in question from the I.R.S. and consult a tax professional before filing the bankruptcy. To get your Federal IRS tax history, call the IRS at 800-829-1040and ask them for a report called MFTRA-X. Tell them you want the MIFTRA-X for each year that you owe them for. They will mail you the reports, and might even fax them if you ask them nicely; Also note that a bankruptcy discharge does not automatically remove any filed or recorded tax lien on any property which you own.  

Los Angeles Bankruptcy Lawyer Leon D. Bayer

Expertise

Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/

Experience

Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.

Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.

Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.


Education/Credentials
B.A., J.D.

Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000

MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.

Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.

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