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Need some advice

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BuckiRob
Established Member

Need some advice

I have scowered the board here to see if anyone else has had to deal with a situation like mine.  I haven’t found any so far.

 

Background.  I am self-employed, wife is a W-2 full time employee of a fortune 100 company.  My business was really hurt by the down turn in 2008.  As a result I was left with tough choices all of which were bad choices.  I had enough to pay my IRS estimated taxes or pay my bills but couldn’t do both.  I opted for not paying the IRS in hopes that I could recover and grow my way out of the problem.  Option 2 Pay the IRS and not pay my bills which would have resulted in being forced into Bankruptcy relatively quickly. 

 

I chose option 1 because at least it gave me a chance to avoid declaring BK.  Fast forward to today…. I have IRS tax liens for 2012 and 2013.  The IRS had deemed 2012 as “currently uncollectable status” and 2013 is being reviewed and will end up with the same status.  I am current on everything.   I got a letter from one of my CC companies informing me of a deduction in my CL and they reported a TransUnion score of 593 (which obviously sucks)

I’ve spoken to a Tax Attorney and her synopsis is that I have a 10 year problem.  The 2013 tax will meet the BK discharge guidelines in December of 2016 but that it will fall off anyway in 2023.

Here is my dilemma, If I file for BK in 2016 it wipes out my IRS debt as well as the 50k I owe in unsecured debt.  I owe the IRS about 110,000.00.  They have 2 liens for each tax year on my home which is fully current and has some equity.

I am seeing confusion about getting a lien released when the debt is discharged in a chapter 7 but most of these are short sales.  If the liens remain on the house, it doesn’t make much sense to file BK as I will totally destroy my credit and I am not free from the liens.

Because we are married and even though my wife had absolutely nothing to do with my business and we maintain completely separate finances she is under this mess because we filed joint returns.  So her credit is being effected by the liens as well.    I am being told the only way she can be freed from the liens is if she either divorces me or we legally separate and she shows separate residence for 12 months.

We thought we could divorce, she could request innocent spouse/equitable relief I would file BK we would remarry and rebuild… but now, I’m not sure that is going to really accomplish what we are trying to do.

Now it’s looking more like we need to sell our home and just ride out the 10 years.  

 

Anyone familiar with something like this?

Message 1 of 10
9 REPLIES 9
ezdriver
Senior Contributor

Re: Need some advice


@BuckiRob wrote:

I have scowered the board here to see if anyone else has had to deal with a situation like mine.  I haven’t found any so far.

 

Background.  I am self-employed, wife is a W-2 full time employee of a fortune 100 company.  My business was really hurt by the down turn in 2008.  As a result I was left with tough choices all of which were bad choices.  I had enough to pay my IRS estimated taxes or pay my bills but couldn’t do both.  I opted for not paying the IRS in hopes that I could recover and grow my way out of the problem.  Option 2 Pay the IRS and not pay my bills which would have resulted in being forced into Bankruptcy relatively quickly. 

 

I chose option 1 because at least it gave me a chance to avoid declaring BK.  Fast forward to today…. I have IRS tax liens for 2012 and 2013.  The IRS had deemed 2012 as “currently uncollectable status” and 2013 is being reviewed and will end up with the same status.  I am current on everything.   I got a letter from one of my CC companies informing me of a deduction in my CL and they reported a TransUnion score of 593 (which obviously sucks)

I’ve spoken to a Tax Attorney and her synopsis is that I have a 10 year problem.  The 2013 tax will meet the BK discharge guidelines in December of 2016 but that it will fall off anyway in 2023.

Here is my dilemma, If I file for BK in 2016 it wipes out my IRS debt as well as the 50k I owe in unsecured debt.  I owe the IRS about 110,000.00.  They have 2 liens for each tax year on my home which is fully current and has some equity.

I am seeing confusion about getting a lien released when the debt is discharged in a chapter 7 but most of these are short sales.  If the liens remain on the house, it doesn’t make much sense to file BK as I will totally destroy my credit and I am not free from the liens.

Because we are married and even though my wife had absolutely nothing to do with my business and we maintain completely separate finances she is under this mess because we filed joint returns.  So her credit is being effected by the liens as well.    I am being told the only way she can be freed from the liens is if she either divorces me or we legally separate and she shows separate residence for 12 months.

We thought we could divorce, she could request innocent spouse/equitable relief I would file BK we would remarry and rebuild… but now, I’m not sure that is going to really accomplish what we are trying to do.

Now it’s looking more like we need to sell our home and just ride out the 10 years.  

 

Anyone familiar with something like this?


Once discharged [both you and your wife must file ch7], the IRS will send a lien-release letter to your county's record keeping dept and it will be recorded there. Subsequent credit reports will then pick up that report and reflect it in your credit reports. You can also call the IRS shortly after discharge and request a copy of that letter which you can then take to the county recording office. Either way, the liens for discharged debt will be released.

 

 

 

Message 2 of 10
StartingOver10
Moderator Emerita

Re: Need some advice

Have you considered filing Bk 13?

 

I ask this because you can deal with your tax liens in the Ch 13.  I don't know enough to be specific but here is a link to start your research.  

 

http://www.nolo.com/legal-encyclopedia/tax-debt-chapter-13-bankruptcy.html

 

I would not divorce for 12 months and then remarry to avoid the problem. It seems unethical to me. 

Message 3 of 10
Dis0314
Established Member

Re: Need some advice

i'm right there with you bro..

 

IRS taxes from past business issues from 2011,2012,2013.. Filed Chp7 Feb 2015 with this and a pile of debt and when discharged in June the IRS was sitting there at the county filing liens on me to the tune of about 90k. Fresh out of BK and already 90k in the hole with no way to win. Worked some agreements out with them based on income and now I'm just dealing with mess.

 

I guess what I'm getting at is chapter 7 doesnt always clear up the IRS. not sure what all the stipulations are but mine didn't fly.

 

Message 4 of 10
BuckiRob
Established Member

Re: Need some advice

 Tax attorney told us that if we got legally seperated she has to be at a new legal address for 12 months... but that if she divorced she could still live at the same address  

 

the whole idea behind innocent spouse is it releives her of the Tax obligation which would prevent her from having to file

 

Message 5 of 10
BuckiRob
Established Member

Re: Need some advice

@Dis....

 

You have to meet the 3 year rule to have the debt discharged from BK.  

 

What I am confused over is there seems to be conflicting information about the liens.  Once you meet the 3 year rule you are no longer obligated financially for the debt but it seems as though the Lien may stay on the home so that if you sell the home before the lien expires any equity would go towards the IRS debt which seems to me to be illegal because the debt is wiped away by BK

Message 6 of 10
BuckiRob
Established Member

Re: Need some advice

@startinover

 

13 would make no sense... I can work out the basically the same terms on a direct payment plan.... I dont have an extra 2000 a month to throw into a payment plan

Message 7 of 10
BuckiRob
Established Member

Re: Need some advice

Nothing unethical at all... its totally legal.  My wife knew nothing about the business is not involved in any way directly or indirectly.  I handled all of the household finances.... in my mind this is 100% my obligation.  She has a full time job is a w-2 employee had her tax withheld and claimed 0 bcause I knew my income would drive her effective tax rate.  What is unethical is the IRS forcing this on her when she did nothing wrong and is frankly not responsible.

Message 8 of 10
ezdriver
Senior Contributor

Re: Need some advice


@BuckiRob wrote:

@Dis....

 

You have to meet the 3 year rule to have the debt discharged from BK.  

 

What I am confused over is there seems to be conflicting information about the liens.  Once you meet the 3 year rule you are no longer obligated financially for the debt but it seems as though the Lien may stay on the home so that if you sell the home before the lien expires any equity would go towards the IRS debt which seems to me to be illegal because the debt is wiped away by BK


You are mixing up items that have no bearing on each other. Having your legal obligation to personally repay an IRS debt discharged is different than the IRS right to try and collect through any other means ... like equity in an asset. If there is no equity in that asset, the IRS will release the lien so that it can be sold to another buyer. I guess that your surprise is more one of considering the IRS' ability to continue trying to collect on a debt to be unfair.

 

Think about it this way ... your assets are subject to disposal to satisfy outstanding debt in a ch7 bankruptcy. IRS is simply a debtor in higher standing than than creditors holding unsecured debt [eg; credit card debt]. Fairness has nothing to do with it.

Message 9 of 10
despritfreya
Frequent Contributor

Re: Need some advice

The 2013 income tax return was due on April 15, 2014 or October 15, 2014 if you filed for an extension. It becomes three years old on either April 16, 2017 or October 16, 2017. It is not eligible for bk discharge until it becomes 3 years old AND you have met all of the prongs of the test for dischargeability. The lien impacts what liability will remain after the entry of the discharge even if all of the prongs of the test are met.

 

 

If and when you file bk, and if the taxes meet ALL of the prongs of the test, the taxing agency will have a "bifurcated claim". It will be "secured" up to the value of the equity you have in any real and personal property and will be "unsecured" for the balance. The taxing agency will agree to abate the "unsecured" portion and may agree to take payments on the "secured" portion.

 

 

Outside the context of the bk, I believe your wife, divorced or not, will remain liable on the tax if this was a joint return. She may want to consult a CPA relative to this issue. See the following from the IRS:

 

 

https://www.irs.gov/pub/irs-pdf/p971.pdf

 

 

Des.

Message 10 of 10
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