IRS Payment Plan and Chapter 7

[CostantinoA]

Hello:

I filed chapter 7 on June 6 and MOC on July 15. My question is before the filing, I was on payment plan with IRS that automatically was taken out my checking. Now that I have filed and have a automatic stay, will they still take out the payments? I logged into their web site and all the amounts owe to IRS is gone.

[FireMedic1]

May sound weird but the IRS is a collection agency for the govt. They have to abide by the same rules as any other CA. If you included them in BK and met all the requiements. They will be DC'ed. One of the reasons why I filed. When the garnishment letter came. I had no choice. Retirement is less than 2 yrs away and I wanted to keep what I worked my hind end off for.

[sarge12]

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@FireMedic1 wrote:

May sound weird but the IRS is a collection agency for the govt. They have to abide by the same rules as any other CA. If you included them in BK and met all the requiements. They will be DC'ed. One of the reasons why I filed. When the garnishment letter came. I had no choice. Retirement is less than 2 yrs away and I wanted to keep what I worked my hind end off for.

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Not really true in many cases...there are special conditions for discharging income tax debt, that does not apply to CA's. One of them is the debt must be at least 3 years old, and the income tax debt must have been assessed at least 240 days prior to bankruptcy filing date. You also must have filed a return, and no evasion, fraud, or fraud penalties have been involved. Payroll taxes are not dischargable. Do not mis-understand this to mean IRS dabt can't be discharged...it often can be an is discharged. They do not however go by the same rules as other CA debt. Yours must have met the conditions that made it dischargable, but that is a far cry from being like any other CA debt.

[sarge12]

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@CostantinoA wrote:
Hello:

I filed chapter 7 on June 6 and MOC on July 15. My question is before the filing, I was on payment plan with IRS that automatically was taken out my checking. Now that I have filed and have a automatic stay, will they still take out the payments? I logged into their web site and all the amounts owe to IRS is gone.

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The debt does not show because the automatic stay on all debts goes into effect with the filing. Any debt that is determined to be non-dischargable debts, will go back on the report and the debt will have to be paid. The following is cut and paste from a website.

Nondischargeable debt is a type of debt that cannot be eliminated through bankruptcy proceeding. Such debts include, but are not limited to, student loans, most federal, state and local taxes, money borrowed on a credit card to pay those taxes, and child support and alimony.

In my previous post, the info came from Nolo, and it further states that if the IRS obtained a lein on your property prior to you filing the bankruptcy, the tax itself may be discharged, but the bankruptcy will not eliminate the lein on your property. Even though you obtained a discharge on the debt, the tax lein would have to be paid before you could sell the property. The date cut and paste was from investopedia in March 2018, and I do not know the date the Nolo information, but unless the Bankruptcy law has changed since it was posted, it likely still applies. Take note it said State, Federal, and Local taxes, as well as money borrowed on a credit card to pay those taxes.

[CostantinoA]

Ok but my question is “if I was on a automatically payment plan that the payment was taken out of my checking account monthly, does the automatic deduction stop during the stay or do they keep taking it out of my account.

[FireMedic1]

The automatic stay stops IRS collection of tax debts during your bankruptcy. But the IRS may be able to collect from you later. Unless you met the qualifications to have the debt discharged.

[FireMedic1]

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@sarge12 wrote:

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@FireMedic1 wrote:

May sound weird but the IRS is a collection agency for the govt. They have to abide by the same rules as any other CA. If you included them in BK and met all the requiements. They will be DC'ed. One of the reasons why I filed. When the garnishment letter came. I had no choice. Retirement is less than 2 yrs away and I wanted to keep what I worked my hind end off for.

---

Not really true in many cases...there are special conditions for discharging income tax debt, that does not apply to CA's. One of them is the debt must be at least 3 years old, and the income tax debt must have been assessed at least 240 days prior to bankruptcy filing date. You also must have filed a return, and no evasion, fraud, or fraud penalties have been involved. Payroll taxes are not dischargable. Do not mis-understand this to mean IRS dabt can't be discharged...it often can be an is discharged. They do not however go by the same rules as other CA debt. Yours must have met the conditions that made it dischargable, but that is a far cry from being like any other CA debt.

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I am well aware of the requirements. Thats how I had my IRS Tax Lien debt discharged, released, and before the new CRA's dropping tax liens and civil judments. It was wiped from my reports from being so old.

[CostantinoA]

ok!  My attorney said I meet the requirements to have 2 of the 3 years I owe discharged.

[FireMedic1]

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@CostantinoA wrote:

ok!  My attorney said I meet the requirements to have 2 of the 3 years I owe discharged.

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Congrats. So 1 of the years is less than 3 yrs old?

[CostantinoA]

Yes, it's 2017, That one I have to pay. It is only $1,100 and the other ones were over 10k total.