How Does a Tax Lien Affect My Bankruptcy?

You owe taxes to the Internal Revenue Service (IRS). To make matters worse you find out the IRS has placed a tax lien on your property with the county recorder’s office. What can you do? Is the tax lien dischargeable in bankruptcy?

Under 11 U.S.C. §§507 and §523, the following taxes are dischargeable in bankruptcy if:

1) The return was last due at least three years before the bankruptcy petition was filed;

2) The tax claim was assessed within 240 days before the date of the filing of the petition;

a) If you have requested an offer in compromise related to the tax you are trying to discharge, the time it takes the IRS to consider the offer in compromise is not counted towards the 240 days. In fact, the IRS adds another 30 days on top of the time it takes for the IRS to make a decision. This means that if you submitted an offer and compromise to the IRS and they rejected the offer in compromise 3 months later, the 240 days assessment period does not include the 4 months (3 month consideration period plus an additional 30 days).

b) If you have filed a previous bankruptcy case, the 240 days assessment period does not include the time you are in bankruptcy and it adds another 90 days on top of that time. So if you filed for a Chapter 7 bankruptcy case previously and it was closed 3 months later, the 240 days assessment period does not include the 6 months (3 months in bankruptcy plus an additional 90 days).

3) The tax return was filed more than two years before the bankruptcy petition was filed;

4) The tax return was not fraudulent or there was no willful attempt to evade the tax.

These rules do not apply if there is a tax lien placed on your property. A tax lien is not dischargeable in bankruptcy. If you own real property the IRS may record a tax lien on the title. If you do not own any real property, the IRS may place a lien on all your personal property.

If You Own Real Property

If the tax lien was recorded on your real property, your personal obligation to pay the debt may be wiped out in the bankruptcy if the income taxes meet the rules listed above. However, even though your personal liability is discharged when filing bankruptcy the tax lien would remain recorded against your property until the tax lien is released. This means if you try to sell your house when the tax lien is still recorded against your property, you will have to pay off the IRS lien in the sale of your home.

If You File Chapter 7 Bankruptcy and You Do Not Own Real Property

If you do not own any real property in a Chapter 7 bankruptcy then the tax lien only attaches to your personal property. Your obligation to pay the tax debt may be wiped out in the bankruptcy case if the income taxes meet the rules above. However, the tax lien would still survive the bankruptcy and the lien remains recorded against all the assets you have owned on or before the date your bankruptcy petition was filed. Fortunately the IRS cannot go after income or assets you acquire after the date you have filed for bankruptcy protection. They can only go after the assets that you have owned prior to filing for bankruptcy. This means the IRS can only repossess the furniture or cars that are paid in full or other personal assets you have owned prior to the bankruptcy filing. Chances are the IRS will probably not come to your door to collect your 20 year old couch because it would be a waste of time for the IRS. The IRS may potentially go after your retirement plans as well since the retirement plans were excluded from the bankruptcy estate. However, they cannot go after your retirement plans until you retire and are eligible for retirement income. By that time, the tax lien may have expired.

If You File Chapter 13 Bankruptcy and You Do Not Own Real Property

So what happens if you are in a Chapter 13 bankruptcy plan and you owe income taxes for both 1) tax years that would have otherwise been eligible for discharge if the rules above are met and 2) recent tax debt that is not eligible for discharge? In a Chapter 13 bankruptcy case, your recent tax debt is considered a priority unsecured debt, and they must be paid in full through your Chapter 13 bankruptcy plan. The other income tax debt that would normally have been eligible for a discharge but for the tax lien is secured up to the amount of assets owned and that amount needs to be paid in full through the Chapter 13 plan (for example, if you have $25,000 of personal property, including cars, bank accounts, furniture, etc., then the $25,000 would need to be paid in the Chapter 13 plan in addition to the priority unsecured debt). The remaining tax debt from the tax lien is treated as an unsecured debt that is discharged in the bankruptcy, but as indicated above, the tax lien still survives the bankruptcy. Therefore the remaining tax debt subject to the tax lien is treated the same as in the Chapter 7 bankruptcy case above. The IRS will still retain the IRS lien on your personal property but they cannot go after income or property you acquire after your bankruptcy case was filed.

6 Ways to Know If You Are in Financial Danger

Life moves by very quickly, and before you know it you could be caught up in some serious financial trouble. If you have been thinking about drastic solutions to your financial problems, you need to make sure that you are in as serious trouble as you think you are. Or, you might think that your financial problems are not too bad. However, after carefully assessing the situation you may need to seek professional help for your money problems.

You can only pay the minimum payments on your credit card. You may not be able to pay the minimum at all if you are really struggling. This is a sign that you owe more than you make. This is never a good situation, and you will end up paying lots of money in late and interest fees over a short amount of time. You are in serious financial danger when you cannot take control of your credit card payments and pay them down quickly.

You are using your credit cards to pay for necessities. Necessary items such as food should never be paid with using a credit card. If you cannot afford to pay for these needed items with cash, then you are seriously putting yourself into debt. You are already likely in debt and cannot afford the needed items because you are using the money to pay for the credit cards. It becomes a never ending cycle.

You are being contacted all the time by debt collectors. If you are cringing every time the phone rings because you know it is another debt collector trying to get you to pay what you owe to his or her company, then you are in serious trouble. Your credit is likely suffering greatly because you are not able to pay your bills on time or at all. Debt collectors typically do not make phone calls unless you are seriously delinquent in paying your bills.

You avoid going through your financial information because it is too overwhelming for you. When you dread looking at your bank information or credit card bills because deep down you know that the truth is not going to be pleasant, you are suffering from huge debt problems or even denial of the size of the problem. It is very important that you take the time to go through your financial information to see exactly where the situation stands. You will need this information later to get help.

You are thinking about drastic measures to take care of your debts. Some people contemplate horrible actions, such as robbery or suicide, in order to be rid of their debts forever. If you have contemplated any of these actions or others, you need to think twice about reacting in this way. There are ways to get help and get you back on track again. There is no need to do something to harm yourself or to do anything illegal.

You are not sure how much you really owe. If you cannot provide the details of your finances, then you are certainly not in control of the situation. You should know exactly how much you owe, what your payments are, and who you owe in order to take the first steps in becoming financially responsible.

It is never too late to turn the situation around and start getting back on track. You can reverse the situation if you talk to a professional who can give you advice about what steps to take next. Research online and find some trusted organizations that can help you get control of your own situation before it gets worse.

What to Expect When You File For Bankruptcy

It can be a very difficult and stressful time in your life when you make the decision to file for bankruptcy. Many people every year must do the same thing in order to financially start all over again, so you are not alone in your concerns. You may be uncertain about what will happen to your and your assets once the court issues the order against you. There are a few things that you can realistically expect to happen to you once the order is in place.

The first thing that will happen is that the court must decide whether they allow you to actually go bankrupt. If the court officially approves your petition, you will be officially bankrupt. At this point, you will receive a copy of the necessary paperwork and you may also be interviewed by the official receiver. There will be information provided to explain to you what you must do next and what information you need to provide.

The information may be done in person or over the phone. The official receiver will make sure that he or she has the correct information about your assets and debts. He or she will ask about the circumstances surrounding the bankruptcy. You may be asked to provide details about your pension or savings. At this point, you may ask the official receiver any questions you may have about the entire process and your questions will be answered.

Then, your assets may be sold to pay off your debts. This will be handled by the person in charge of managing your bankruptcy. This is typically the official receiver or an insolvency practitioner. You will probably be allowed to keep anything that you need for your job and household items. If these items cost more than a reasonable replacement, you will likely have to have them sold for you.

You must relinquish your bank cards, credit cards, and anything for any financial accounts that you are no longer approved to use. Your trustee may give you money for things that you need right away, such as food. If you have a partner, your partner will be allowed to get his or her share of the money in a joint account when the accounts are frozen. The bank that you use will make the decision on whether or not to allow you to continue banking with them.

You will also be given a list of bankruptcy restrictions that you may not break or else you may be found guilty of a criminal act. Some restrictions may include but are not limited to the amount of money you are allowed to borrow, creating and managing a new company, or work as a debt specialist. Those restrictions last typically about a year after your case was made official, but this could be longer in some cases.

You must also be aware that your name and details will be listed on a public register called the Individual Insolvency Register. This information will allow people to know when you will be freed from your debts, debt relief orders, and other information. If you find any mistakes on the register, you should contact the office in charge of your case. Typically these records are removed after a few months.

Remember that you should seek professional advice before making any permanent decision about your financial future. You may find that this option is the best option for you, or you may find another way to take care of your debts. Be sure that you understand each decision thoroughly before making any choice. Once you have made a choice, you cannot reverse the process, so choose wisely.

Your Creditors In Bankruptcy

If you are like most debtors, dealing with creditors and collections is the straw that makes a bad situation, worse. Threats of repossession, credit damage, and constant phone calls often push people to the point of wanting to give up. Luckily, there are ways to stop credit collections and hand over the responsibility of dealing with creditors.

Automatic Stay

One of the most immediate benefits of filing for bankruptcy is the issuing of the automatic stay. Once your case has been filed with the court all of your creditors are served with a notification of the automatic stay. This court order not only prohibits creditors from contacting you, they also cannot make any attempts to collect on the debt in question. Any violations of this order could leave the creditor facing serious consequences and even threatens their ability to stake a claim on any repayment in your case.

Meeting Of Creditors

While your creditors will be prohibited from collecting from you, they do still have some rights in bankruptcy. Creditors have the right to file a proof of claim on the debt in question, and attend the 341 meeting of creditors. You will be required to attend this meeting as well for the purposes of answering any questions regarding these debts. This may sound scary, but it is due process for the bankruptcy case to ensure that those who do want to file a claim get the chance to. However, this does not mean that a creditor is guaranteed any repayment by filing a proof of claim, nor do all creditors even show up to this meeting.

The bankruptcy court determines which creditors get repaid based on their priority status and the calculation of your income based repayment plan, if applicable. Not all creditors will have their proof of claim granted, and many may walk away empty handed. Priority debts such as the IRS, domestic support obligations, and criminal restitution payments are always first on the list to be paid through a Chapter 13 plan or Chapter 7 liquidation. Debts like credit cards and medical bills usually fall at the end of the list and are discharged with lesser to no costs to you.

After A Discharge

Once the court grants you a discharge, any of the eligible debts included in the case will be considered resolved and remain uncollectible under the automatic stay. This means that if your medical bills are discharged and the creditor received little to no payments, those bills remain uncollectible forever. However, it is important to note that the automatic stay will only grant immunity to the person who filed bankruptcy on jointly held debts or debts with more than one responsible party for repayment.

Great Banks Bring You Comfort

You want to keep track of your money, and the best way to do this is by finding a financial institution that offers many options for banking. These types of businesses want their customers to feel secure and appreciated, and the right bank will bring you a sense of comfort. Learn what to look for when choosing a place to safely house your earnings.

Customer Service

When it comes to banks, customer service is key. You want to choose a facility that has short wait times when you are standing in line. Efficient and helpful associates help you place money in the appropriate accounts for maximum benefit.

If you are opening an account for the first time, choose a branch that has lots of friendly people who are willing to work with you to choose the right account for your needs. You want to compare checking, savings, and other accounts side by side with an associate who will have patience while explaining the differences to you.


You don’t just want to throw your funds into any account and walk away. You want options to maximize your benefit. Choose checking accounts with a low minimum balance and a decent interest rate, or savings that allow you to transfer money from other accounts on a monthly basis. Banks that offer you many different options for housing your money are the most likely to be able to meet your personal needs.


All banks are insured, so you don’t have to worry about your funds. Choose facilities that have security cameras in their parking lots, and well-lit ATMs for after-hours withdrawals and deposits. Check the building to make sure that safes are out of sight, and that employees work behind safety glass for their protection. The more measures in security a financial institution makes, the more secure you know your funds are.


Many banks have weekend or extended hours, so you don’t have to take time off work to access your money. You can also take advantage of online banking, so you can check your funds during closed hours. Choose an institution that is open on Saturdays or has late Friday hours so you can talk to a representative whenever you want. The more flexible a banking facility is, the more convenient they are for you to use on your own time.

Banks are known for their ability to keep their customers happy, so finding a great one is not a difficult task. As you explore your banking options, keep many factors in mind. The way customers are treated, how funds are handled, and how secure a building is can all be indicators of how great a financial business is. Explore many different kinds of branches before settling on one that will work for you, so you know you and your money are in professional hands. With a bit of research, you will find the perfect institution that will work best for your financial needs.