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  1. #1

    Exclamation Are You Still Liable for Tax Debts After a Bankruptcy Discharge

    My question involves bankruptcy in the state of: AL

    Received a discharge notice on principally tax debts but it contained standard boilerplate about how tax debts are not normally discharged. My research shows that old debts over 3 years (mine are +9 years) can be discharged. Also one of the debts is not mine but I can't seem to have my day in court to discuss this matter. Can I request a hearing and where can I find information on how to fight these tax debts? Thanks

  2. #2
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    Oct 2014
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    Default Re: to Set Hearing to Challenge Tax Debts

    You have not said what type of bankruptcy you had, what kinds of tax liabilities these are, nor anything about the liability that you say is not yours. It also matters exactly what the discharge notice says. Without all those details it is not possible for me to tell you much. However, most discharge orders in a Chapter 7 bankruptcy case are general discharges, which discharges all eligible debts of the debtor except those specifically stated in the order. There are some debts, including some kinds of taxes, that are not eligible for discharge and these are not discharged in the general discharge even though those debts are not specifically mentioned in the order. But the rest of them are discharged unless the court says they are not. So, if the tax liabilities you had were eligible for discharge, you were given a general discharge of your debts, and the court did not exclude your tax debts from the discharge then they would be automatically discharged and in that case there is nothing more for you to do. If you provide more details on your tax liabilities and your bankruptcy I may be able to provide more help.

  3. #3

    Default Re: to Set Hearing to Challenge Tax Debts

    The filing is for a chapter 7, the title is Order of Discharge. It seems to be boiler plate stating most debts are discharged but not all including some taxes. It does not talk about MY debts, just comments which are boiler plate (wish I could attach the pDF). What I need to know is the status of MY debts are they discharged or not? Willing to pay a small amount for someones time to help me ask them properly. Thanks

    My tax debts are income taxes not paid over 9 years ago (personal). Another tax debt is taxes for a corporation which I was part owner but transferred ownership regarding taxes to another party but I was stuck with the debt when the company (not being run by me) went out of business. I listed the taxes as disputed.

    This is the Order .....

  4. #4
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    Default Re: to Set Hearing to Challenge Tax Debts

    It appears you received a general discharge of your debts. If the debt was eligible for discharge and no exception was mentioned in the order excluding it from discharge then the debt was discharged. If a debt was not eligible for discharge then it was not discharged even though the order did not specifically excluded those debts. You have to look at each debt to determine if it was eligible for discharge. With income tax debts, the tax is generally eligible for discharge if the return had been filed by the taxpayer at least 3 years before the filing of the bankruptcy petition and it had been at least 240 days since the tax had been assessed by the tax agency. So, if you filed the returns that are the basis of your income tax debts and those debts had been around for 9 years or more those debts are almost certainly discharged now and you’d need to do nothing more about those. Indeed, for federal taxes the statute of limitation (SOL) for collection of tax is 10 years, so it may be that some of your tax debts were already unenforceable anyway (though bankruptcy extends the time for collection of federal tax if the SOL had not yet expired when the petition was filed).

    The tax liability for the corporation, however, is another matter. You did not say what tax was involved but when an individual is held liable for the federal tax owed of a corporation the most common reason is that the corporation failed to paid withheld taxes (e.g. withheld income tax and FICA taxes of employees, withheld tax of foreign investors, etc) and the IRS determined that the individual was a responsible person in the corporation and assessed what is called the trust fund recovery penalty (TFRP) against the responsible person under IRC § 6672. Many states have similar laws for withheld taxes, too. Under the bankruptcy code, trust fund tax obligations are not dischargeable. So if you were held liable for a trust fund tax liability the discharge order will NOT discharge that tax debt. You should have contested the tax agency’s determination that were a responsible person either using the appeal procedures in the tax code or by contesting that liability in an adversary proceeding in the bankruptcy court. If you did not do that you could be stuck with this obligation. If this is the situation you have then I strongly suggest you see a bankruptcy attorney to find if it is still possible to challenge the liability now so that you won’t owe it. You might still be able to challenge it later in federal district court or the court of claims after the bankruptcy if it is a federal tax obligation, but the details of the tax involved matter and you’d have to pay at least part of the tax claim to do it.

  5. #5

    Default Re: to Set Hearing to Challenge Tax Debts

    So on the corporation ( I did not find out about this issue until many years later so I never had my day in court) you are saying that debt might not be discharged. The issue is however how can I find this out? Contact the Bankruptcy court or call the IRS? Really cannot afford the thousands it would take to do something formal with a tax or bankruptcy attorney so if this court will not hear me out --- seems I am stuck with resolving this directly with the IRS. True?

  6. #6
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    Default Re: to Set Hearing to Challenge Tax Debts

    The first step for the corporate debt is to find out exactly what the IRS assessed against you personally. Once you know exactly what kind of debt it was and how long ago it was assessed you can start to figure out what, if anything, you need to do about it now. If you have an IRS office located near you, the easiest thing may be to walk in there and ask a taxpayer service rep to pull up the transcript for any liability you owe other than income tax and start with that.

  7. #7

    Default Re: to Set Hearing to Challenge Tax Debts

    Does anyone in this forum have the knowledge to help construct a proper query to the bankruptcy court to ASK for them to detail which debts were part of the discharge and which debts were NOT included. As noted above, the specific debts ( all tax related ) where not listed specifically. Very hard to move forward with unknowns hanging over my head. Happy to pay for costs. Thanks.

  8. #8
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    Default Re: to Set Hearing to Challenge Tax Debts

    Quote Quoting mawhelchel99
    View Post
    Does anyone in this forum have the knowledge to help construct a proper query to the bankruptcy court to ASK for them to detail which debts were part of the discharge and which debts were NOT included. As noted above, the specific debts ( all tax related ) where not listed specifically. Very hard to move forward with unknowns hanging over my head. Happy to pay for costs. Thanks.
    You’ve already received a general discharge order. The court isn’t isn’t now going to shift through your debts to tell you which debts were eligible for discharge and thus included in the discharge you received and which debts were not eligible for discharge and thus excluded from the discharge just for your piece of mind. Indeed, the court doesn’t even have the information needed to make that determination. From what you have said, it’s likely that all the individual income tax liabilities were discharged; however, the corporate liability assessed against you likely was not. You can try to contact the IRS bankruptcy unit that handled your bankruptcy and ask them which of your tax liabilities it has designated as discharged as a result of the court order. Or you can consult a bankruptcy lawyer to look at each liability and tell you which ones were discharged and which were not.

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