QUESTION

Can you get rid of a tax levy via bankruptcy?

Asked on Sep 14th, 2011 on Bankruptcy - Louisiana
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1 ANSWER

Bankruptcy Attorney serving Burbank, CA
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The way you phrase your question, it is difficult to answer.  Filing bankruptcy will at least temporarily stop a tax levy.  The real issue is whether the underlying tax is dischargeable and, if so, what assets you have on the date your case is filed that are subject to the tax lien.  It also depends on the type of tax involved.  I am going to assume for the sake of brevity that you are referring to income taxes owed either to the IRS or your state taxing agency.   Other types of taxes, such as excise taxes, property taxes, etc. may be treated differently. Income taxes are dischargeable if all of the following prerequisites are met as of the date your bankruptcy case is filed: (1) it has been more than 3 years since the returns were last DUE (including extensions) to be filed, (2) the returns were timely filed or it has been at least 2 years since the returns were filed, (3) there was no fraud involved or attempts to evade the tax, AND, (4) the taxes were not assessed within the last 240 days. Tax liens survive the bankruptcy discharge and attach to whatever assets you have on the date your bankruptcy case was filed (in the case of the IRS; state tax liens usually only attach to real estate).   Depending on the value of your assets, you can usually get the IRS to release their lien after a discharge is entered.  If you have a large amount of assets, you may be required to make some payment to the IRS to release the lien.  Whether it is prudent to do that really depends on what assets you have (for example, if it's all items you never intend to sell, such as clothing, etc.) then the lien isn't going to affect you much anyway. It is critical to consult with a knowledgeable bankruptcy attorney in your area to properly assess your situation and advise you accordingly. Mark J. Markus, Attorney at Law Handling exclusively bankruptcy law cases in California since 1991. http://www.bklaw.com/ bankruptcy blog: http://bklaw.com/bankruptcy-blog/ Follow Me on Twitter:  @bklawr
Answered on Sep 14th, 2011 at 1:56 PM

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