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  1. #1
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    Default Will Bankruptcy Protect Pension Benefits from a Tax Lien

    My question involves bankruptcy in the state of: California, Central District

    I'm 58, been on SSDI since 2008, and began collecting an early pension from my previous employer in 2010, and have been in Not Collectible Status, Hardship with the IRS on $12,000 in back taxes since 2010. Immediately after qualifying for NCS with the IRS, two liens were filed against me. I had zero assets then, but am concerned the pension will now be considered an asset to satisfy the liens.

    I'm filing Chapter 7 in June for medical and credit card bills, mostly long charged off in 2011 or sold to junk debt buyers.

    My income taxes meet the three-year and 240-day rules, and all returns were timely filed.

    My SSDI income is $2,400 a month, and the early pension, an annuity fully funded during my 20 year employment, was fully paid by the employer.

    I understand the taxes can be discharged, but I'm concerned the liens will remain and the IRS will seize the pension payments to satisfy my tax debt.

    My attorney is somewhat evasive on this. He says after the taxes are discharged, just request the IRS vacate the liens.

    Any advice?

    Thanks.

  2. #2
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    Default Re: Chapter 7, Social Security Disability and Early Pension and IRS

    Expect the IRS to take their money. Frankly you are in a middle income bracket for the US and should be able to afford your taxes. Your SSDI is attachable at I believe 25%.

  3. #3
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    Default Re: Chapter 7, Social Security Disability and Early Pension and IRS

    Yes, the SSDI is attachable up to 25 percent of the benefit amount, but I was receiving the SSDI when I was placed in CNS status, a fairly complicated and detailed review. My question is specifically to the early retirement annuity. I meet all of the requirements for discharging the IRS debt, but am looking for someone with experience in removing the lien after discharge.

    IRS liens survive bankruptcy even if the tax is dischargeable, and the liens are normally removed by the IRS automatically.

    I was wondering if the annuity complicates my situation.

    I don't think it's necessary to list my medical or other debts to determine if I meet someone's definition of whether I earn enough money to be able to afford my taxes. The taxes were incurred when I defaulted on 401(k) loans to pay divorce expenses followed by medical expenses related to cancer surgery unrelated to my disability.

    I'm looking for experience, not judgment, but thanks for replying.

  4. #4
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    Default Re: Will Bankruptcy Protect Pension Benefits from a Tax Lien

    I will be more blunt. You must still list your household budget including the SSDI which will be on SCH I. Though it does not directly count as income, it can and likely will disqualify you from CH 7 bankruptcy.

  5. #5
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    Default Re: Will Bankruptcy Protect Pension Benefits from a Tax Lien

    WIth my debts, and SSDI of $2,350 ($2,120 net after Medicare and $75 towards an overpayment is withheld) and early pension benefit of $609, I meet all requirements to file Chapter 7 and have my debts discharged, including my IRS debt, per my attorney and per my fledgling interpretation of eligibility requirements after spending a few weeks reading the USBC web site and other sources.

    I respect your opinion, Disagreeable, but I'm seeking forum members experience on the chances of the IRS removing its lien after discharge of qualifying IRS tax debt.

    I'm also seeking to discharge $4,000 in SSDI overpayments made by the SSA by no fault of my own. I'll save that discussion for another thread, but thought I would offer you some more bait.

  6. #6
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    Default Re: Will Bankruptcy Protect Pension Benefits from a Tax Lien

    Quote Quoting lomalindabk
    View Post
    WIth my debts, and SSDI of $2,350 ($2,120 net after Medicare and $75 towards an overpayment is withheld) and early pension benefit of $609, I meet all requirements to file Chapter 7 and have my debts discharged, including my IRS debt, per my attorney and per my fledgling interpretation of eligibility requirements after spending a few weeks reading the USBC web site and other sources.

    I respect your opinion, Disagreeable, but I'm seeking forum members experience on the chances of the IRS removing its lien after discharge of qualifying IRS tax debt.

    I'm also seeking to discharge $4,000 in SSDI overpayments made by the SSA by no fault of my own. I'll save that discussion for another thread, but thought I would offer you some more bait.
    Yes, the IRS does remove liens when the tax debt is discharged in bankruptcy.

  7. #7
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    Default Re: Will Bankruptcy Protect Pension Benefits from a Tax Lien

    Thanks, llowking.

    - - - Updated - - -

    Quote Quoting Disagreeable
    View Post
    I will be more blunt. You must still list your household budget including the SSDI which will be on SCH I. Though it does not directly count as income, it can and likely will disqualify you from CH 7 bankruptcy.
    Gosh, Disagreeable. Please expound on that. Everything I've read and from what my attorney tells me, SSDI and ERISA retirement funds are exempt in Chapter 7 whether using state or federal exemptions.

    With monthly income of $2,800 and medical and other debts more than $40,000, seems to me I qualify.

  8. #8
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    Default Re: Will Bankruptcy Protect Pension Benefits from a Tax Lien

    Wanted to provide an update on my Chapter 7 for others on SSDI and dealing with taxes. My petition was filed last month and my no asset Chapter 7 progresses. Taxes qualify for discharge and I easily met the means test. My 341 hearing is scheduled for next week and will update how that goes.

    My attorney expects smooth sailing and we will wait until discharge, sometime in September, to see what the IRS will do with the lien filed in 2010.

    My attorney has dealt with others with IRS debt qualifying for discharge and who are on SSDI. He has seen the IRS simply remove the liens. ANd he feels my small pension which I started at age 55 will be safe. The IRS treads softly on those who rely on small pensions to survive, especially those in not collectible status, per IRS determination.

    I didn't want others to be discouraged in taking steps to fix their financial past, especially those who face old IRS incurred while still working and prior to disability and the drastic loss of income that that entails.

    I appreciate this forum and those who take time to answer questions, especially from those like me who are a little panicky from the whole ordeal. I will update after my 341 hearing.

  9. #9
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    Default Re: Will Bankruptcy Protect Pension Benefits from a Tax Lien

    No one questioned whether you met the means test. The issue was how the court would see your overall financial position relative to repayment.

  10. #10
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    Default Re: Will Bankruptcy Protect Pension Benefits from a Tax Lien

    Update: 341 Hearing July 28, Trustee notice of no distribution to creditors, abandonment of assets, and trustee validation of no presumption of abuse filed July 31, according to PACER.

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