No one likes bankruptcy, except bankruptcy attorneys. For most Americans, it remains a very negative process. In fact…many of our clients refuse to even consider bankruptcy during a first meeting. I don’t blame them. It is interesting however, how many of those who are initially so opposed, change their minds once they see the potential benefits.
Why is bankruptcy such a mind changer? Some quick background:
The Bankruptcy Code, which is updated occasionally by Congress, reflects our Nation’s desire to provide a fresh start for debtors. The Code attempts to create a system that forces those that can afford to pay their debt out, and allows those that can’t…in.
This balancing process between “who should and who shouldn’t” is applied to tax as well. Certain types of tax are considered so important by society that the bankruptcy code doesn’t allow for them to be wiped away (discharged). “Trust fund” taxes like taxes that are withheld from an employee paycheck to be forwarded to the government by the employer, are a common example.
Income taxes don’t warrant the same concern, and therefore the bankruptcy code provides for their discharge in specific circumstances. Those circumstances are as follows:
The tax return had to be filed more than two years before the bankruptcy filing.
The tax return had to be due for filing more than three years before the bankruptcy filing.
The tax debt had to have been “assessed” or entered into the IRS record as a debt, more than 240 days before the bankruptcy filing
The taxpayer didn’t file a fraudulent return.
The taxpayer didn’t engage in tax fraud more generally or engage in tax evasion.
These dates are found in the Bankruptcy Code sections 507(a)(8)(A)(i), 523 (a)(1)(B) and 507(a)(8)(A)(ii).Of course you realized while reading this list that nothing is ever that simple, and for a number of reasons you are right.
The first reason is that in an effort to be fair to the debt collectors at the IRS, the Bankruptcy Code requires that the clock stop ticking in certain circumstances. Circumstances like time spent in a previous bankruptcy, collection due process appeal, or offer in compromise. It is not always easy to calculate these time periods as a result. Also, the taxpayer has to wait for these time periods to pass. In the meantime, the IRS is aggressively looking for money.
So if the date calculations are complex, and the tax lien can negate many benefits of the discharge…why such a mind changer?The primary reasons:
1. The Bankruptcy Code controls the Tax Code
If the taxpayer meets the various bankruptcy qualification criteria and the tax debt meets the requirements for discharge, the IRS has little say in the matter. This isn’t a subjective decision on it’s part. It has to do what is told. If it doesn’t i.e. it tries to collect the debt when it wasn’t supposed to, the taxpayer can sue. This is as opposed to trying to deal with the IRS directly in an offer/installment/other situation where the IRS is the decider of facts and the applier of the law.
2. Bankruptcy can be a “one-stop” shop
Many people with serious tax debt have other serious debt as well. If planned well, bankruptcy can deal with all of the problems at one time and some that many don’t realize were “fixable”. Not only can income tax and consumer debt be dealt with, but cars can be “crammed down” to market value, homes saved, and assets protected. All legal options provided by the tax code, deal with the tax debt only.
3. The lowest debt settlement program is the no asset chapter 7 bankruptcy
Where the bankruptcy trustee in a chapter 7 bankruptcy is unable to collect any assets for liquidation and distribution to creditors, which is a common occurrence, the IRS will get nothing as well. This amount is always less than the settlement amount in an offer in compromise.
a. Legal standards do exist that govern how the IRS should view the offer to compromise the debt, but they are…a bit loose. Loose enough that the IRS is able to inject a great amount of subjectivity into the process. Bankruptcy on the other hand, creates quantifiable results based on objective criteria. Offer in compromise results are all over the place.
b. These legal standards have a lot to do with what the IRS thinks you can afford to pay toward the debt over time. The starting point for household budgets is very low and is usually much lower than the taxpayer’s actual budget. The IRS doesn’t have to consider certain budget items at all, like consumer debt payments and savings plans. This usually results in a large discrepancy between what the IRS thinks the taxpayer can afford and what the taxpayer thinks he can afford.
c. Failure is costly. Most need legal representation and that costs money. Most/all of which doesn’t get refunded when the offer fails. Most have to pay some large amount to file the offer (20% of cash offer amount, or monthly payments based on the offer amount) which isn’t refundable when the offer fails. The debt continues to grow in the background thanks to interest, and when the offer fails all the new debt is waiting with hat in hand and even a smile.
5. High income taxpayers don’t always have to “qualify” for a chapter 7 bankruptcy
There is an exception in the bankruptcy code to the requirement that all who file chapter 7 bankruptcy must pass a test of ability to pay debt. Where the majority of the debt is tax debt, this rule doesn’t always apply. As a result, many who wouldn’t be able to even hope for an offer in compromise, are able to use bankruptcy to discharge the debt.
6. Many with serious tax debt don’t have large assets
Most taxpayers with serious tax debt, will see the IRS record a Notice of Federal Tax Lien. As mentioned above, that lien attaches to all assets. When the bankruptcy is filed and the underlying debt is discharged, the tax lien remains and is in essence a secured debt. It’s value is based on the value of the assets on the date of the bankruptcy filing. If the taxpayer owned a home that was “underwater”, a car with $5000.00 in equity and some furniture, the lien is almost worthless and the IRS will often remove it.
7. Chapter 13 bankruptcy is often a “cheaper” solution then an installment agreement.
The taxpayer may not be a good offer in compromise candidate, and may not be a good chapter 7 candidate because the tax debt is not the greatest part of the overall debt or for another reason. The taxpayer is left with two options: An installment agreement to pay the tax over time and wait out the statute of limitations period, or a chapter 13 bankruptcy.
The installment agreement amount is often much higher than the taxpayer would like. The chapter 13 bankruptcy payment on the other hand, can be based on friendlier budget criteria. In many cases the taxpayer can deal with all of his debt with a smaller monthly payment than the IRS was requiring to deal with the tax debt alone.
Bankruptcy is a process that takes place in Federal Court. The Bankruptcy Code governs the process and it is designed to provide debt and other relief to consumers and small businesses. Most consumers and small business people file a bankruptcy as a “liquidation” case called a Chapter 7, and some consumers and small business people file a “Reorganization” bankruptcy or Chapter 13. Very few Consumers or Small Business People file a Chapter 11 Bankruptcy, which is typically used for Corporate Reorganization of Debt.
In a Chapter 7 Bankruptcy you are asking the Court to wipe away as many debts as can be wiped out according to Bankruptcy Code. In a Chapter 13 Bankruptcy you are asking the Court to reorganize your financial life, pay some debts, wipe away others, primarily based on what you can afford and what types of debt you have.When you file a bankruptcy a Court Order automatically goes into affect. This is called the Automatic Stay and it stops most creditors from collecting during the case.
Certain types of debt survive a chapter 7 bankruptcy like child support, spousal maintenance, certain tax debt, most student loan debt and debts incurred fraudulently.
2. HOW DO I KNOW WHICH CHAPTER, CHAPTER 7 OR CHAPTER 13 I SHOULD FILE?
When you file a chapter 7 bankruptcy you are asking the Bankruptcy Court to sever your obligation to pay most of your debt. In exchange for that “discharge” of debt you have to give the Bankruptcy Trustee your assets or at least those that aren’t protected by various asset exemption laws in Arizona. The Trustee will take those non-exempt assets and divide them amongst your creditors.
A Chapter 13 Bankruptcy is not a liquidation case like a chapter 7 case. You don’t have to give up any assets. You do have to pay your creditors on a monthly basis a certain amount of money. The amount of money you pay your creditors depends on several factors. The most important are
a. Your income levy in the past and in the future.
b. Your budget
c. The amount of priority debt i.e. debt the bankruptcy code considers so important that it can’t be “discharged” and it must be paid in a chapter 13 in full.
d. The amount of secured debts you have like car loans
e. The value of your non-exempt assets: Again, those assets that aren’t protected by the Arizona Exemption Statutes.
With a good breakdown of the above information we can determine how large your plan payment will be in a chapter 13 case, whether that amount will protect your non exempt assets, and how much of your non priority debt will be wiped away after the case is over.
If you qualify to file a chapter 7 bankruptcy there are a number of reasons why you may choose to file a chapter 13 bankruptcy anyway: Some of the more common are:
a. You have assets that are not exempt that would be lost in a chapter 7 filing and that you consider important enough to keep that you are willing to pay their value to your creditors in a chapter 13 case.
b. You are about to lose your home to foreclosure and have no other way to bring it current. A chapter 13 case will allow you to spread the amount you are behind over 3-5 years and stop the foreclosure.
c. You have a car that is worth much less than you owe on it and/or that is about to be repossessed. The chapter 13 will stop the repossession and allow you to pay the market value of the car over 3-5 years at a reduced interest rate (in most cases) if you purchased the car more than 2.5 years ago.
d. You have non-support related debt obligations as a result of a divorce decree. These obligations are dischargeable in a chapter 7 but are in a chapter 13 Bankruptcy.
e. You feel the need to pay something back to your creditors and have a steady income.
3. SO I CAN JUST CHOOSE WHICH TYPE OF BANKRUPTCY TO FILE?
If you qualify to file both a chapter 7 Bankruptcy and a chapter 13 Bankruptcy than you can choose which one better suits your needs.
There are a number of ways a person doesn’t “qualify” to file a chapter 7 Bankruptcy or a chapter 13 Bankruptcy, but it is important to understand that even if you qualify for either, the choice you make could be a difficult one. An experienced Arizona Bankruptcy Attorney can help to make sure all of the issues are considered before making such an important decision.
4. WHEN AM I INELIGIBLE TO FILE A CHAPTER 7 OR A CHAPTER 13 BANKRUPTCY?
The most common situations that prevent a person from qualifying to file a chapter 7 Bankruptcy are:
a. Failed Means Test – Bankruptcy Law requires that each filer is “means tested”. In order to pass the test your disposable income after subtracting certain expenses and debt payments must result in less than a specific amount payable to your creditors over 5 years. This test can be complex in some cases and planning is often involved. If you fail it, you can’t file a chapter 7 bankruptcy UNLESS the majority of your debt is business or tax related.
b. Filed a Previous Bankruptcy – If you filed a chapter 7 bankruptcy within the last 8 years and received a Discharge you can’t file another. If you filed a Chapter 13 within the last 6 years and received a Discharge you can’t file a Chapter 7 Bankruptcy.
c. Dismissal – If your Bankruptcy case was dismissed within the last 180 days in certain circumstances.
d. Fraud – You defrauded your Creditors
The most common situations that prevent a person from qualifying to file a Chapter 13 Bankruptcy are:
a. Filed a Previous Bankruptcy – If you filed a chapter 7 Bankruptcy and received a discharge within the last 4 years you are ineligible to file a chapter 13 Bankruptcy and receive a discharge.
b. Too Much Debt – Chapter 13 bankruptcy is limited to those who have less than $1,184,200.00 in secured debt and unsecured debt of $394,725.00.
c. Business – Business Entities can’t file a chapter 13 Bankruptcy. (Self employed individuals can)
d. Disposable Income – You must have income that is high enough to pay your basic living expenses and a payment to the Bankruptcy Trustee that will pay car loans, mortgage arrears, priority debt, fees, value of non-exempt assets, and an amount to unsecured creditors required by the means test.
e. Haven’t Filed Tax Returns – You must file at least the last 4 years and continue to file during the case.
5. WHAT CAN BANKRUPTCY DO FOR ME?
Bankruptcy can do a number of things for you if you are having serious debt problems. The most common are:
a. Eliminate your obligation to pay most of your debt.
b. Eliminate the obligation to pay tax on the eliminated debt as you may have to if it were forgiven outside of bankruptcy
c. Stop a foreclosure on a home and allow you to pay the arrears over time
d. Stop the repossession of your car and even force the return of it in certain circumstances.
e. Stop wage garnishment, debt collection calls.
f. Restore or prevent termination of utility service.
g. Allow you to challenge creditor claims
h. Allow you to pay less per month on your debt obligation than you may have had to pay the IRS directly.
6. BANKRUPTCY CAN DISCHARGE DEBT, SAVE MY HOME FROM FORECLOSURE, PROTECT CERTAIN ASSETS AND SOME OTHER GREAT THINGS, BUT, WHAT CAN’T IT DO
a. It can’t eliminate certain debt obligations
Certain debt obligations aren’t discharged in Bankruptcy. The most common are: Child Support/Spousal Maintenance, Property Settlement Debt related to divorce (chapter 7 only), Certain taxes, Most student loan debt, debt you forget to list (there are exceptions in a chapter 7 bankruptcy), debts related to drunk driving or criminal activity and fraudulently incurred debt
b. It can’t prevent a creditor whose debt is secured with property from taking the property. Bankruptcy can eliminate the obligation to pay the debt, but it doesn’t eliminate most liens. So if you don’t continue to pay for your car, you won’t be obligated to pay for it but the bank can take it.
c. It can’t protect co-signers. When a relative or friend has co-signed a loan, and you discharge the loan obligation in your bankruptcy, the co-signer may still be on the hook. (This may not be true in Arizona re: your spouse)
d. Discharge debts that you incur after Bankruptcy
7. CAN BANKRUPTCY ELIMINATE MY TAX OBLIGATION?
The most common type of tax debt obligation eliminated in bankruptcy is income tax. There are some basic requirements for this type of debt obligation to be eliminated in Bankruptcy.
a. The Tax Return must have been due more than three years before you file the bankruptcy.
b. The Tax Return must have been filed by you more than two years before you file the bankruptcy
c. The Tax Debt must have been assessed by the IRS more than 240 day before you file the bankruptcy case
d. You cannot have filed a fraudulent tax return or otherwise willfully tried to evade paying tax.
We have helped hundreds of clients discharge millions of dollars in income tax debt using bankruptcy and the rules although simple on their face can get confusing and an experienced tax and bankruptcy attorney is often necessary to sort them out.
There are other benefits that bankruptcy can provide in relation to tax debt as well like:
a. A chapter 7 bankruptcy will discharge the obligation on most income tax penalties and interest on the penalty older than 3 years
b. A chapter 13 bankruptcy will allow you to treat most income tax penalty and interest on the penalty as dischargeable debt no matter how old the tax debt is
c. The non trust fund portion of employment tax if owed by the individual business owner is dischargeable in bankruptcy if it meets the date requirements.
d. Arizona Sales Tax (Transaction Privilege Tax) is dischargeable in bankruptcy if it meets the date requirements, as it is not a trust fund tax.
8. WILL BANKRUPTCY ALLOW ME TO GET RID OF MY SECOND MORTGAGE?
In Arizona, a Bankruptcy can be used to “get rid” of your obligation on the second mortgage if:
a. The home is worth less than the 1st mortgage is owed making the second mortgage fully unsecured
b. You file a chapter 13 Bankruptcy and follow the local rules in filing certain documents and following certain procedures
c. You complete the chapter 13 Bankruptcy and obtain a discharge.
9. CAN I FILE THE BANKRUPTCY WITHOUT MY SPOUSE?
In Arizona you may be entitled to what is called a “community discharge” of your debt. This means that even if your spouse doesn’t file with you he or she may protect community assets and income from creditors as long as you are married.
10. HOW WILL BANKRUPTCY AFFECT MY CREDIT?
The affect on your credit score as a result of bankruptcy is difficult to determine. Generally, if you have bad credit now and bankruptcy will wipe out the obligation on a number of debts listed on your credit report, your credit should improve. Bankruptcy should be considered a last resort and if the decision between filing and not filing is being made based solely on the effect the bankruptcy will have on the credit report, you may not be a good bankruptcy candidate.
Many of our clients have both serious tax debt and other debt at the same time. These other debts may be student loans, state taxes, credit cards, medical bills, business debt or some combination.
If you read this blog you know that the IRS tries to use it’s own budget in determining how much someone can afford to pay toward the tax debt…both in an offer in compromise and in certain payment plans. When that budget is used, it almost never includes credit card payments.
When those credit card payments are disallowed by the IRS as part of the budget, the amount being paid on those credit cards becomes part of the IRS payment plan and creates what is often called “phantom income”. As a result, the taxpayer now has a new payment plan with the IRS and no money to make the credit card payments. There isn’t enough money left to go around.
Unfortunately, the taxpayer is often so afraid of the IRS he or she will accept the IRS payment plan and start dealing with credit card company phone calls and lawsuits. No lottery win or rich uncle? Sleepless nights ensue followed by wage garnishment…once the creditor(s) obtain a judgment.
Believe it or not, bankruptcy often solves this problem.
If the taxpayer doesn’t qualify for a chapter 7 bankruptcy a chapter 13 bankruptcy may make a difference.
In a chapter 13 bankruptcy, all non-priority debt like old income tax debt and credit card debt share the “left-over” money. If debt is left when the plan is over, it is discharged like in a chapter 7 bankruptcy. If the IRS debt is “priority” it will be treated better than the credit card debt and get paid first. If any funds remain, some credit card debt gets paid with it and the remainder of the credit card debt will be discharged.
If you have serious tax debt and credit card debt and you find yourself in a phantom income situation, you need to have an experienced attorney:
a. Determine whether you qualify for a chapter 7 bankruptcy
b. Determine whether a chapter 7 bankruptcy would make sense if you do qualify to file
c. If a chapter 7 bankruptcy doesn’t make sense, compare a chapter 13 bankruptcy plan to non-bankruptcy alternatives.
Filing For Bankruptcy? 33 Dates You Should Be Aware Of
1. 10 YEARS BEFORE FILING BANKRUPTCY – NON-EXEMPT PROPERTY CONVERTED TO EXEMPT PROPERTY If you owned property within the last 10 years and it was “non-exempt” property, i.e. property not protected from creditors or from the Bankruptcy Court, AND you contributed the property to your otherwise exempt homestead or to a burial plot with the intent to hinder, delay or defraud a creditor, the value of that contribution may not be exempt. If you placed the non-exempt property in trust for the same purpose, the transfer could be avoided.
Lesson – If…any time during the last ten years you moved assets in relation to creditor problems, talk to an experienced bankruptcy attorney before you file for bankruptcy.
2. 8 YEARS BEFORE FILING BANKRUPTCY – PRIOR CHAPTER 7 BANKRUPTCY FILING PREVENTS CURRENT CHAPTER 7 BANKRUPTCY FILING
You aren’t allowed to receive a discharge in a Chapter 7 Bankruptcy if you received a discharge in a Chapter 7 Bankruptcy Case filed within the last 8 years. You can obtain a bankruptcy discharge if the prior bankruptcy was within the last 6 years and as a result of a chapter 13 case in which you paid 100% of unsecured claims or 70% of allowed unsecured claims and you proposed the case in good faith and used your best effort to complete it.
Lesson – If you filed a previous bankruptcy make sure that you have calculated the filing date right and prohibition date for the new case.
3. 4 YEARS BEFORE FILING BANKRUPTCY – PRIOR CHAPTER 7 BANKRUPTCY FILING PREVENTS CURRENT CHAPTER 13 BANKRUPTCY FILING
No discharge is allowed in a chapter 13 case if you received a discharge in a chapter 7 case that was filed within the last 4 years.
Lesson – Same as lesson in number 2 above
4. 3 YEARS 4 MONTHS BEFORE FILING BANKRUPTCY – HOME EQUITY EXEMPTION LIMITED POSSIBLY
You cannot exempt equity in your home more than $125,000.00 if acquired 3 years, 4 months prior to filing. (Time Limit doesn’t apply if moved equity from prior residence located in same state and in Arizona see the McNabb case).
Lesson – This is a tricky rule and one you should speak to counsel about if your home has more than $125,000.00 in equity.
5. 2.5 YEARS BEFORE FILING BANKRUPTCY – PAY MARKET VALUE FOR CAR
A highly relied upon rule exists that says that if you purchased a vehicle more than 2.5 years before your chapter 13 filing, you may be able to pay the lender just the value of the car and not what is owed on it if it is upside down. Car must be for personal use.
Lesson – Car older than 2.5 years and underwater? One reason to consider a chapter 13 bankruptcy instead of a chapter 7 bankruptcy
6. 2 TO 2.5 YEARS BEFORE FILING BANKRUPTCY – WHICH STATE’S EXEMPTION LAWS YOU GET TO USE
When you file for bankruptcy you are entitled to protect certain assets. Bankruptcy Lawyers call those protected assets “exempt” or the laws that protect the assets “exemptions”. Which set of laws or exemptions you get to use to protect your assets in a bankruptcy case are determined by the State of your residence for the last 2 years before you file the case.
BUT if you didn’t live in a single state of 2 straight years, then the exemption laws you use are determined by where you were domiciled the 6 months preceding the 2 years before filing.
BUT if that state doesn’t permit a non-resident to use it’s exemption laws, then you may choose the Federal Exemption Law to protect your assets.
Lesson – Talk to an Experienced Bankruptcy Lawyer if you have been moving around a bit and have assets you are concerned about.
7. 2 YEARS BEFORE FILING BANKRUPTCY – CHAPTER 13 TO CHAPTER 13
You can’t receive a discharge in a chapter 13 case if you filed a chapter 13 within the last two years and received a discharge. Rare.
8. 2 YEARS BEFORE FILING BANKRUPTCY – TRANSFERRING ASSETS – POTENTIALLY BIG PROBLEMS
You can be denied the bankruptcy discharge if you tried to hinder, delay or defraud a creditor by transferring, destroying or hiding an asset within one year prior to the bankruptcy filing. The Trustee can retrieve the property if the same was done within 2 years if the transfer was completed for less than market value.
Lesson – Don’t give stuff away, sell stuff for less than it is really worth, or hide things just to avoid creditors. You should be especially careful if you have done these things within the last two years and are considering a chapter 7 or chapter 13 bankruptcy. Also take into account your State’s Fraudulent Transfer Statute. In Arizona the look back period is 4 years.
9. 1 YEAR BEFORE FILING – PAYMENTS TO RELATIVES OR “INSIDERS” FOR DEBTS OWED CAN CAUSE A PROBLEM
If you pay someone back money you owe them and you know them pretty well, the Bankruptcy Trustee may be able to ask for the money back if the payment was made within a year of the bankruptcy filing. There is a small amount you are entitled to pay back. In a chapter 13 case you may be able to pay the amount transferred to your other creditors in the plan and protect your Auntie Velma from having to pay the money to the Bankruptcy Trustee.
Lesson – If you have paid money back to a creditor who is also related to you, or close to you in some way, talk to an attorney about what could happen to that person…but only if you want to be comfortable at your next Thanksgiving Dinner.
10. 180 DAYS BEFORE FILING – NO FILING NEW BANKRUPTCY CASE
If you filed for bankruptcy previously and the case was dismissed because you ignored the judge, didn’t show up for a hearing, or filed a request for dismissal after an automatic stay was granted to a creditor (difficult in a chapter 7)…you may not be able to file another bankruptcy for 180 days.
Lesson – Recent filing? It may be best to wait the creditors out before filing again.
11. 91 DAYS BEFORE FILING – MINIMUM RESIDENCY REQUIREMENT
You have to be a resident in the state in which you are filing for at least 90 days. It isn’t true that you can move to a new state and file a bankruptcy the next day, unless that new state has been their principal place of business or the location of their principal assets for the majority of the last 180 days.
Lesson – Get your calendar out right after you drop off the U-Haul.
12. 90 DAYS BEFORE FILING – PAYMENTS TO CREDITORS
The amount you can pay to creditors within the 90 days prior to filing the case is limited. It can be considered a “preference” and recovered by the bankruptcy trustee unless it was a payment made in the ordinary course of business or “financial affairs of the debtor”.
Lesson – If you owe your favorite dentist a heap of money, and just prior to filing the bankruptcy you want to sell your non-exempt Star Wars memorabilia collection and pay him or her off, think twice. The Bankruptcy Trustee may sue the Dentist to recover the funds and your Dentist won’t like you anymore anyway.
13. 90 DAYS BEFORE FILING – 90 DAY CREDITOR ADDRESS RULE
If the creditor has contacted you within 90 days of the filing date, you really need to make sure that you have included any address(s) that were contained on the correspondence in the master mailing list.
14. 70-90 DAYS BEFORE FILING – CERTAIN DEBTS WON’T GO AWAY
If you borrow money or take a cash advance that are not necessary for the support of the family and do it within 70 or 90 days of your bankruptcy filing date, those amounts are presumed to be non-dischargeable if they are above 750 (cash advance) and 500 (luxury good and services).
Lesson: Just don’t borrow money for a long time before you file for bankruptcy.
15. 1 DAY BEFORE FILING OR 180 DAYS
You have to take a class before filing. You have to take the class within 180 days of the filing date and ideally at least the day before.
Lesson: People forget to take the class, take it and forget that it was a long time ago and then file or take it after filing. Map this out.
16. BANKRUPTCY FILING DATE – THE PETITION AND OTHER STUFF
A Bankruptcy is kicked off when you file a bankruptcy petition with the Bankruptcy Court. This creates an automatic stay that prevents most creditors from continuing collection activity unless you filed a prior bankruptcy in the last 12 months then the stay is only good for 30 days unless the Judge decides otherwise. If two cases were filed in the last 12 months no stay exists at all.
Don’t forget to file the Verified statement of your social security number and the credit counseling certificate for the class you took within 180 days of filing.
You must understand exemption law when you file and what is or is not property of the bankruptcy estate. You must have also correctly completed the means test.
The process of filing the case comes with it’s own set of rules and requires the preparation of 60-100 pages of detailed disclosures and information.
Lesson: Sometimes it’s better to have some help
17. AFTER FILING – DOMESTIC SUPPORT OWED
If you owe child support or spousal maintenance on the date you file the bankruptcy, then the Bankruptcy Trustee is required to provide the person owed money that assistance is available and when the case is “discharged” the Trustee is required to give up your last known address and where you work.
Lesson: Make sure you disclose whom you may owe and amounts in your schedules.
18. 5 DAYS AFTER YOU FILE THE BANKRUPTCY PETITION – MASTER MAILING LIST, SOCIAL SECURITY NUMBER STATEMENT AND CREDIT COUNSELING CERTIFICATE
Three things you must do within 5 days of filing.
The Master Mailing Matrix has to be filed
The Statement of Social Security Number has to be filed
The Credit Counseling Certificate must be filed.
Failure to do the first or third results in automatic dismissal of case, failure to do the second is potential dismissal.
Lesson: It is always the small things that can ruin your day.
19. 10 DAYS AFTER FILING THE BANKRUPTCY PETITION – PRESUMPTION OF ABUSE
The Clerk of the Bankruptcy Court must give notice to all creditors if there is a presumption of abuse to within 10 days of filing.
Lesson: It is important to understand the bankruptcy means test and it’s relation to the success of your case.
20. 15 DAYS AFTER FILING THE BANKRUPTCY PETITION – REMAINING DOCUMENTS FILED
If you haven’t filed the schedules, paystubs, means test, receipt of 342(b) notice, and the chapter 13 plan if not filing a chapter 7 bankruptcy, when you filed the petition they are due within 15 days.
Lesson: It is usually best to have the schedules and plan completed and filed with the petition and schedules. Not only to avoid problems with filing them late but also to make sure the case will work before you file the bankruptcy petition.
21. 14-21 DAYS AFTER FILING THE BANKRUPTCY PETITION – THE COURT MAILS NOTICE OF BANKRUPTCY TO EVERYONE
The Bankruptcy Clerk is going to mail a notice to everyone, this takes about 2-3 weeks. The notice tells creditors when the 341 meeting is, when to object to discharge and when to file proofs of claim:
Lesson: Sometimes creditors need to know about the bankruptcy long before 2-3 weeks arrives. If you are being garnished, facing a foreclosure or repossession, you may want to let specific creditors know about the Bankruptcy the day you file.
22. 30 DAYS AFTER FILING THE BANKRUPTCY PETITION – STATEMENTS OF INTENT
You have to file a document called a “Statement of Intention” within 30 days of Petition filing. This statement tells everyone what you intend to do with property that is security for a loan. There is a requirement to file the same thing regarding unexpired leases as well.
Lesson: What you are going to do with property that is securing a loan can be a bit complex. Get some advice.
23. 30 DAYS AFTER FILING – DEADLINE TO MAKE FIRST PLAN PAYMENT IN A CHAPTER 13
If you filed a chapter 13 Bankruptcy case, you have to make your first plan payment by sending it to the Chapter 13 Bankruptcy Trustee’s special address for receipt of plan payments. He or she should provide you instructions regarding this prior to the deadline.
Lesson: Remember Chapter 13 Bankruptcy is different than Chapter 7 Bankruptcy. You are paying money into the Trustee to be distributed typically on a monthly basis for a defined period of time.
24. 45 DAYS AFTER FILING THE BANKRUPTCY PETITION – AUTOMATIC DISMISSAL
Your case gets dismissed automatically if you filed some of the thing mentioned above like, creditor mailing matrix, schedules, paystubs, etc. Lesson: You are seeing that the bankruptcy code is full of deadlines. Pay close attention.
25. 20 TO 50 DAYS AFTER FILING OF BANKRUPTCY PETITION – MEETING OF CREDITORS
The Bankruptcy Code requires that you attend a creditors meeting. You get noticed of this date, time and place when the court issues the Notice of Bankruptcy. If you don’t show your case can be dismissed. As a side note: prior to this hearing by 7 days, you have to have a copy of a tax return for the last year a return was actually filed to the Trustee.
Lesson: Everyone with an interest in your case gets a shot at questioning you. Most won’t but that doesn’t mean you shouldn’t be prepared.
26. 60 DAYS AFTER FILING – PROOF OF INSURANCE
In a Chapter 13 case you have to provide proof that your personal property that is acting as collateral is insured.
Lesson: Nice little side issue that routinely is forgotten about until it isn’t.
27. 30 DAYS AFTER CREDIT MEETING – YOUR EXEMPTIONS MAY BE IN TROUBLE
The Trustee and Creditors have 30 days after the creditor meeting is over to object to any exemptions you have claimed as to your property.
Lesson: Make sure before filing the case that your property is exempt or that you have accepted the fact that it isn’t.
28. 35 DAYS AFTER CREDITOR’S MEETING – CHAPTER 13 TRUSTEE HAS TO FILE A RESPONSE TO YOUR PROPOSED PLAN
In a Chapter 13 case, you have to propose a “Plan”. That plan must comport to a number of rules, laws and customs in order to be approved by the Judge. The Trustee gets his or her say in the matter and files this response about 35+ days after the Creditor’s Meeting. This response will typically pick apart your plan if it has weaknesses.
Lesson: Most Chapter 13 Bankruptcy cases filed without experienced legal counsel fail. The vast majority. Many fail even with experienced counsel. If a Chapter 13 bankruptcy is necessary, you have a much better chance if you enlist the help of someone who has done it many times before.
29. 45 DAYS AFTER CREDITOR’S MEETING – STATEMENT OF INTENT AND ANOTHER CLASS
Remember the Statement of Intent you filed? Whatever you intended has to be done by now. You also have to take a second class and file the certificate proving that you took it with the Court.
Lesson: Just because you went to the 341 meeting, the work isn’t over. Deals with creditors and more class time are just two examples.
30. 60 DAYS AFTER CREDITOR’S MEETING – CREDITORS AND OTHERS HAVE TO TAKE ADVANTAGE OF MOMENT IN THE SUN
You are proposing to reduce or eliminate debt you owe. Don’t be surprised if some feelings are hurt. Your creditors can and must within the 60-day deadline object if they are going to do so to the discharge of a debt or all debt. The same deadline applies to motions to dismiss for abuse of the code under 707(b).
Lesson: There is a lot of research you need to do about which debts are non-dischargeable, what activity can cause a debt to be considered non-dischargeable and the effect your income and budget may have on your case.
31. 90 DAYS AFTER CREDITOR’S MEETING – NON GOVERNMENT CREDITORS NEED TO GET A MOVE ON
A creditor has to tell the Court what it is owed and prove it to some degree in order to get paid. In Arizona, the Trustee in a Chapter 7 case will often tell the creditors to hold off until it is known whether there is going to be any money to share.
Lesson: Whether a Creditor files a Proof of Claim or not may be important to your case.
32. 120 DAYS AFER FILING THE BANKRUPTCY CASE – IN A CHAPTER 7 CASE – DISCHARGE ENTERED
In a Chapter 7 case the Discharge of Debt is calendared. It isn’t necessarily permanent though. It can be revoked or maybe even left “un-entered” if you have been “naughty” and don’t comply with certain requests or get other things done on time.
Lesson: The Chapter 7 Discharge is the goal right? Pay attention so that you don’t lose it.
33. 180 DAYS AFTER FILING – PROOFS OF CLAIM BY THE GOVERNMENT BE FILED – A SPECIAL NOD TO THE IRS
The IRS and other government entities owed money by you have longer than the average bear to tell the Court how much is owed and why. This applies in both a Chapter 13 and in a Chapter 7 case.
Lesson: If you have government debt, especially tax debt, there may be some important issues here. Learn about what they are.
The result of an IRS audit is often a balance due. We are often asked several questions at the end of an Audit as a result. Questions like:
Will the IRS accept an amount less than what I owe and forgive the balance?
Will the IRS agree to a payment plan?
Will the IRS place a lien on my property if I am in a payment plan?
Can I use Bankruptcy to get rid of the debt?
Shortly after the audit related debt is placed in the IRS’ books it will start shooting letters to you. “Balance Due” letters and “Final Notice” letters will issue over a period of several weeks. You’ll receive a letter at the end of the string of letters called a “Final Notice of Intent to Levy”. This letter is important because it provides you the ability to challenge collection action by the IRS and request an alternative solution IF you properly reply to it within 30 days of it’s mailing date. The time between the assessment of the new debt and the date you get to discuss alternative solutions with the IRS usually provides enough time to analyze and plan your case.
Back to the common questions above:
Will the IRS accept an amount less than what I owe and forgive the balance?
The IRS will settle the debt IF you can prove that your “reasonable collection potential” (RCP) is less than the amount of the debt during an Offer in Compromise proceeding. Proving your RCP isn’t done by discussing your situation with the IRS. It is based on a formula. The formula is simple in theory, but the majority of people who try and prove that their RCP is low enough to require settlement of the debt…fail.
They fail for all sorts of reasons, but primarily because the filers aren’t great candidates. Or in other words, the RCP is high enough that the IRS believes it can collect all of the debt before the statute of limitations on collections runs out.
No matter what the IRS Offer in Compromise calculator you are seeing online says about your RCP, be skeptical, and get a second opinion from someone experienced with the process.
If you are a good candidate for an Offer in Compromise, then the answer to the question is yes, the IRS will likely settle the debt for less than what is owed and forgive the rest.
Will the IRS agree to a payment plan?
Yes in almost every case. There are several types of payment plans and which type you request and end up getting will depend on the amount of the debt, the time left in the statute of limitations period, your income, your budget, the budget the IRS believes you should have and your assets.
The most common type of payment plan(s) we see are streamlined plans. The debt in these types of plans are less than 50000.00 and the taxpayer can afford to pay the balance over 72 months. These types of plan allow the taxpayer to avoid submitting a full financial statement and if done properly can even prevent the filing of an IRS lien.
If the taxpayer can’t afford to pay the debt over 72 months or if the debt is greater than 50000.00, than the solution becomes a bit more complex and the factors mentioned above become very important in determining how much a payment plan will be.
In some situations it is possible to convince the IRS to take very small amounts each month or even nothing each month even if the debt is very high.
Will the IRS place a lien on my property if I am in a payment plan?
If the debt is less than 25000.00 and you enter into a certain type of payment plan, the IRS won’t record a lien notice. If they already have they will release it and even withdraw it from your credit report if you follow certain steps.
If the debt is less than 50000.00 and no lien notice has been recorded AND you enter into a streamlined payment plan that allows the IRS to take the payment from your bank or pay, the IRS won’t (or shouldn’t) file the notice of lien.
If the debt is above 50000.00 or one of the above two situations don’t apply, bets are off. You can expect the lien and will have to formally request that the lien notice not be filed and have a very good reason why it shouldn’t be.
A successful Offer in Compromise will result in a lien release as will an eventual bankruptcy where the debt is paid or discharged and there are few assets for the lien to remain attached to.
Life after an IRS audit involves dealing with the IRS Collection Division. In audits that result in money owed, it is recommended to be pro-active and to understand the next step that awaits you – IRS collections. There is no substitute for preparation.
Can I use bankruptcy to get rid of the tax debt?
A very strong…”it depends” applies here. Bankruptcy will discharge an obligation to pay income tax debt, penalty on income tax debt and interest on penalty and income tax debt. It will also discharge the obligation on certain other types of tax debt…but two things have to be true:
1. The tax debt has to meet the criteria for discharge both date criteria and other criteria. (Learn More)
2. You need to be a good candidate for bankruptcy.
If you have new debt which is the result of an audit, the debt won’t be dischargeable in bankruptcy from a date standpoint for at least 3/4 of a year depending on how old the tax year is. It may be 3+ years before it is dischargeable in bankruptcy from a debt standpoint.
We have many clients who use bankruptcy to deal with tax debt but these types of cases require real analysis, comparison to other options and usually some time spent in a payment plan before bankruptcy ends up making sense.
If you have been audited recently and you now owe money to the IRS, get your situation reviewed by someone who understands your options. Don’t just settle for what the IRS tells you to do, you may be able to reduce or eliminate the debt at some point.
The IRS Offer in Compromise program, the one you hear about on radio and TV…really exists. It actually works too. Many people settle tax debts both large and small with the IRS every year. But…it isn’t for everyone. In fact, most Offers in Compromise filed with the IRS are rejected for a number of reasons. You can read more about that here.
Just as important…many who qualify for an Offer in Compromise choose not to file one.
Strange I know… but it happens all the time.
Here are the 5 most common reasons it does.
Tax and other debt
If you have old tax debt and much of it is “dischargeable” in bankruptcy AND you have other debt that needs to be dealt with in bankruptcy, then an Offer in Compromise may be a waste of time and money.
This isn’t true in every case, and there are reasons why people who have tax and other debt can’t use bankruptcy without some negative side-effects, but it is usually the case that bankruptcy makes more sense.
Not a great candidate for an offer in compromise but a good candidate for a bankruptcy
What if a taxpayer had a large tax debt as a result of under-withholding for several years and the total tax debt is $150,000.00. The IRS is threatening collection. He can’t pay it in full over the time left in the statute of limitations for collection and his best offer in compromise number would be $25,000.00. Assume as well that he would qualify for a bankruptcy and that the bankruptcy would discharge his entire tax obligation.
He doesn’t have access to the $25,000.00.
A bankruptcy may make more sense.
Difficulty remaining in “compliance”
In order for an Offer in Compromise to work permanently, the taxpayer has to remain in absolute compliance with the tax code for a 5 year period after acceptance of the Offer. If a tax return is late or if a new debt is incurred, the offer is revoked and the complete amount of debt with it’s new interest becomes collectible once again.
One of the lesser known aspects of an Offer in Compromise is that in order to be ‘permanently’ accepted, the taxpayer must remain in complete compliance with the tax code for a period of 5 years after the offer was accepted. Failure to do so, by not filing returns or by creating a new liability, means that the offer is undone, and the complete amount that was settled comes back into play.
If a taxpayer is going to have a hard time remaining in compliance, then another option may make more sense.
Previously filed and rejected Offers in Compromise
Many people think that filing an offer in compromise is just filling out some paperwork. In very simple cases, it can be not much more complex than that. But in most cases, a story has to be told; a factual story that will convince the IRS to agree to the proposed settlement. The filer has to understand all of the rules and exceptions to the rules as well. Failure to tell the story properly and/or failure to know the rules and their exceptions will usually end up in a rejection.
Most Offers in Compromise are rejected and the belief that filing an offer is just filling out some documents and crossing fingers… is the primary reason why.
A common example we see is the taxpayer that has been filling out a financial statement and sending it with a 656 form over and over again. Each time the offer is rejected and the statute of limitations on collection is extended.
But also each time an Offer is filed the IRS sees that filing adds to the bad faith the IRS already sees in the taxpayer. When the newest Offer is filed the IRS won’t take it seriously.
Statute of Limitations on collection isn’t far away
Imagine that you filed a return on April 15, 2005. If no tolling of the statute has occurred as a result of a bankruptcy filing, a previous offer in compromise, or certain appeals/litigation, the IRS’ 10 years to collect the debt is about to run out.
Imagine as well that the $150,000.00 dollar debt that has accrued with penalty and interest would likely settle via offer in compromise for $25,000.00.
Sounds great right?
Imagine as well, that the IRS would agree to a $750.00 payment each month toward the debt or that you were already in that payment plan.
Would you file the offer in compromise? I would advise you not to.
Why? You have about 8 months before the statute of limitations on collection kills the debt owed to the IRS. A payment plan at $750.00 for 8 months ends up being a lot less than $25,000.00. The offer in compromise would extend the collection statute and if it didn’t work out the taxpayer would be at square one, and there won’t be any 5-year look back issue mentioned above.
No, the IRS doesn’t have to leave you a livable wage.
The IRS must only follow a table that determines how much money it must leave for you to live on each month. See IRS Publication 1494.
The amount that it must leave is small, and there are just 4 factors that play into the determination:
Whether you are married
The number of exemptions you should claim
Whether you are older than 65
Whether you are blind
If you are married filing a joint return and you get paid on a monthly basis, and take 2 exemptions, the IRS will leave you 1666.67 to live on.
It won’t matter if you make $2000.00 per month or $20,000.00 per month, the IRS will leave you 1666.67 to live on each month until the debt is paid off or you do something else to deal with the debt like:
a. Arrange a payment plan or non-collectible status situation based on another set of budget figures.
b. Propose an Offer in Compromise
c. File a Bankruptcy
Obviously the IRS doesn’t use the IRS Publication 1494 to collect the debt. It uses it to force you to do something about the debt. If you have serious tax debt… and a levy has been threatened by the IRS, do something about it before your life becomes governed by Publication 1494.
After many years helping people deal with tax debt and the IRS, and with all the information on the Internet about solving tax debt problems, I am still surprised when someone tells me that tax debt can’t be wiped out in bankruptcy.
But it happens all the time.
The truth is that tax debt can be discharged in bankruptcy and not just income tax. Here is a quick review of income tax debt and bankruptcy as well as other types of tax debt and bankruptcy.
Income tax debt is the most common type of tax debt discharged in bankruptcy. I have helped clients get rid of millions in income tax debt. Income tax debt is wiped away in bankruptcy if it meets a few requirements.
The return was due more than three years before the bankruptcy filing
The return was filed by you not the IRS more than 2 years before the bankruptcy filing
The debt was by the IRS more than 240 days before the bankruptcy filing.
The return that the tax is based on cannot have been filed “Fraudulently” and:
The Taxpayer cannot have attempt to “evade or defeat” the tax
There are exceptions to these rules and exceptions to the exceptions. If you have serious tax debt, it is mandatory that you have an experienced lawyer review the history of each tax year before filing a bankruptcy.
Now…as mentioned above, other tax debts can be discharged in bankruptcy too.
Payroll Tax – Non Trust Fund
If you are self employed or own a small business you are required along with every other employer withhold income, social security and Medicare tax (FICA) from your employee’s paycheck.
You have to match the FICA and send it all in. If you don’t send it in, you will owe the entire amount personally without any action being taken by the IRS, if your are self employed or the business is a “Single-Member LLC”.
This means that you will owe the Employee’s Income Tax, FICA and your matching amount with penalty and interest.
The employee amount along with penalty and interest that attaches to it is never going to be discharged in bankruptcy, as it is a “trust fund” tax i.e. you were holding it in trust and were responsible for it.
But…your part, the employer part, can be discharged in bankruptcy if the criteria mentioned above under the income tax requirements are met and there haven’t been any “tolling” events.
I just finished a Bankruptcy case where my client owed more than $50,000.00 in old employment related debt that consisted of the employee portion and her portion. The Bankruptcy stripped off the employer portion with it’s interest and discharged her obligation on it, making it possible for her to more easily set up a payment plan with the IRS.
Arizona Transaction Privilege Tax
Arizona Transaction Privilege Tax is thought of as a sales tax, but it isn’t. It isn’t collected from your customer. It is just a tax for the privilege of doing business here in Arizona. Not every business has to pay for the privilege of course.
The amount of the tax is determined by a percentage of sales and because you as the business owner weren’t collecting and holding the money that belonged to someone else…this money isn’t considered “trust” money. This is key.
Because if isn’t a trust fund tax…it is dischargeable if it meets the basic criteria laid out above.
This is usually an issue where a small business went south a few years ago, filed the Transaction Privilege Returns while struggling to stay afloat, but just couldn’t pay the amount with the returns. Now, the business owner is on to something else and the State of Arizona Department of Revenue is on her heels.
I recently helped a client use bankruptcy to discharge personal debt and some of this old Arizona TPT debt of more than $25,000.00 that was lingering around and causing the State to take enforced collection action. It happens.
The IRS likes penalties. Penalties are the primary way it “teaches” us all not to do the same thing twice. File your return late…penalty. Pay the tax late…penalty.
These Failure to Pay and Failure to File Penalties are the most common.
Chapter 7 Bankruptcy will wipe away these two penalties if the “triggering” event or the event that resulted in the penalty assessment occurred more than 3 years ago.
Chapter 13 Bankruptcy will wipe them out …but they don’t have to meet any of the date criteria above.
These penalties can easily double a tax debt over a relatively short period of time. Many of my clients have used Chapter 13 Bankruptcy to treat these penalties as dischargeable and pay the non-dischargeable tax debt over 3-5 years.
If your property tax bill is 1 year old, your obligation to pay it can be discharged in bankruptcy. However, the Property Tax may be a lien on your property, so even if the obligation is discharged, you still may have to pay the debt to protect the property.
IRS Civil Fraud Penalty (IRC Sect. 6663)
A Civil Fraud Penalty is serious business. It is a penalty assessed by the IRS on a tax return filed fraudulently with the intent to pay less than what was really owed. The penalty amount is 75% of the principal tax debt amount. If the tax debt is $100,000.00 than the penalty is $75,000.00.
If the fraudulent returns were filed more than 3 years before the bankruptcy filing…this penalty could be dischargeable as well.
The myth will endure of course…but now you know better. If you have a serious tax debt problem, talk to someone with experience in these matters and find out whether a bankruptcy can help.
The IRS’ ability to collect a Tax Debt ends 10 years after the IRS assesses the Tax. This also applies to IRS Liens. This 10 year period starts running on the date the IRS assesses the Tax or writes in down in it’s books as a debt owed by you. The 10 year period doesn’t start to run when the IRS lien is recorded.
Fred owes unpaid Income Tax for the 2005 tax year. This tax was “assessed” on October 20, 2007. The IRS records it’s Lien in August of 2010. The 10 year date from assessment will occur on October 20, 2017. The Lien will self release on that date as well.
Most Important Exceptions
If the IRS sues you on the underlying debt and obtains a Judgement, it will than be able to renew that Judgement indefinitely and the Statute of Limitations period won’t help you.
Filing a Bankruptcy will extend the Statute for a period equal to the time in Bankruptcy plus six months. If you file a chapter 7 bankruptcy and from filing date to closure date the case is open for 12 months, the Statute of Limitations on collection will be extended for 12 months.
Offer in Compromise
The filing of an IRS Offer in Compromise stops the clock from running as well during the time in the Offer plus 30 days. Sidenote…most Offers are still rejected, so if you are going to use an IRS Offer in Compromise in hopes of eliminating tax debt, make sure you have a good chance of winning.
As a general rule, appealing IRS collection activity will stop the Statute of Limitations Clock from running as long as it stops IRS Collection Activity.
Out of Country
If you have been out of the Country for a continuous period of more than six months, that absence will extend the statute period as well. Generally, the time period of extension is limited to 5 years.
If you have been out of the Country for continuous period of one year visiting family, than the Collection Statute can be extended for 1 year as that period is longer than 6 months. If you visited family for less than 6 months, the extension won’t apply.
Important to Know the Date
If you have a serious Tax Debt and it has been around for a while, it will be important to know the 10 year collection statute date before embarking on an IRS Offer in Compromise, Bankruptcy or some other serious legal option. Your solution may be as simple as arranging or re-arranging an installment agreement or non-collectible status with the IRS and waiting out the clock.
If you had a serious illness like some form of Cancer, who would you want to consult with first?
Your Cousin Fred
A Family Doctor
A Doctor who specializes in Treating Your type of Cancer
You would want to speak with the Specialist right? Why? A Specialist has been trained for years to understand your illness and specifically treat it.
Go it alone
If you have a serious Tax Debt problem wouldn’t the same thought process apply?
I mean, you could go it alone right, talk to Fred a bit and do some research…
But if the problem were serious enough, would you take the chance that you had the time and ability to learn how to solve it and implement what you had learned?
Of course you are going to do some of your own reading on the subject, but reading some websites and downloading a few articles isn’t going to help you find and obtain the best solution to a serious tax problem. It wouldn’t help you solve your own serious illness either.
The IRS is trained and collects taxes every day – they are good at it. You will be doing it once…hopefully. You aren’t good at it and Fred probably isn’t either.
The IRS is trained to make you feel comfortable and to disclose things or provided thing that will hurt your case.
A Tax Attorney is specifically trained to research and zealously pursue his or her client’s best interests agains the IRS. A good Tax Attorney will make the IRS work hard, and
will often find ways to reduce or eliminate substantial amounts of tax debt using methods you may not know existed.
What about your Accountant?
Accountants do a lot of accounting like Preparing Financial Statements and balancing Books. Most Accountants spend very little time dealing with Tax Resolution issues, if any time at all. Accountants are great for planning ahead, preparing necessary items, calculating tax returns and helping you take advantage of legal tax breaks.
An accountant isn’t always equipped and doesn’t necessarily want to be equipped, to deal with the serious problems that arise from failing to file returns or failing to pay the tax debt.
Thats the job of a Tax Lawyer, someone who focuses on the law surrounding tax debt collection and tax controversy.
Tax problems are a legal issue. They are based on United States Laws that state that give the IRS the ability to seize money and property and charge you with a crime.
If you are really ill, you may visit your family Doctor first, I agree. A good family Doctor will recognize quickly that you need to see a specialist. A good Attorney will do the same and tell you to see another lawyer who focuses on dealing with Tax Debt. Attorneys who don’t focus their practice on Tax Problem Resolution are at a disadvantage primarily because they haven’t spent enough time dealing with the issues surrounding Tax Collection to know all of the ins and outs.
I don’t practice Family Law for the same reason.
You wouldn’t continue to see your Family Doctor if he or she didn’t deal with your type of Cancer on a regular basis either would you?
Serious Tax Debt
Serious IRS Debt requires the use of an Attorney who deals with the IRS directly and in Bankruptcy Court all the time. If you don’t use an Attorney with that type of practice you may very well miss out on a loophole in the law that will cure your problem.