I have an IRS lien that is attached to a house underwater that the bank is taking in a couple of months after foreclosure judgment. I do not have any assets of value. So the IRS will not receive any compensation in a Chapter 7 Bankruptcy. I am 100% sure the old taxes will be discharged in bankruptcy. Will the lien automatically be lifted upon discharge? If not, what do I have to do to get the lien lifted and can the lien be applied to newly acquired future property after bankruptcy even thought what I owe the IRS was discharged in the bankruptcy?
The debt will be dischargeable if it fits within the twin tests of 11 USC 523(a)(1) and 507(a)(8). You can only determine dischargeability of taxes by examining the transcript of account and comparing the dates and codes against the Bankruptcy Code. Be careful. You are stuck with the lien. Discharging the taxes does not give grounds for eliminating the lien, which will expire at the end of 10 years from filing, but can be renewed.
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Chapter 7 Bankruptcy Attorney
I would not be so certain that the IRS debt is dischargeable. The rules for discharging tax debts are fairly complex. You should revise this with an experienced bankruptcy attorney before so concluding. Plus the fact that the tax lien has attached to property in which there is no equity does not mean you are out of the woods, necessarily.
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Chapter 7 Bankruptcy Attorney
An adversary complaint against IRS can be filed during the bankruptcy case to confirm the debt is discharged. The lien continues to attach against existing property you own at the time of filing the case, but the judgment in the adversary complaint can specify that the IRS lien does not attach against future acquired assets.
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I have been successful at getting the IRS to release tax liens on discharged tax debt in cases involving a Chapter 7 bankruptcy with minimal assets (less than $25k in equity). I normally request this in writing after the Order Granting Discharge is issued. The IRS does this in many situations as a matter of public policy. It is within their discretion, however, and they do not have to. Also, if you owe taxes for non-dischargeable years, they will not release the liens for the discharged years until the non-discharged years are paid. I agree with the other attorneys that this is complicated and you should get a bankruptcy attorney to help you.
The information provided herein does not create an attorney client relationship and is not a substitute for having a consultation with a bankruptcy attorney. It is important to have a consultation with a bankruptcy attorney as the information provided in this forum is limited and cannot possibly cover all potential issues in a given situation.
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Once the lien has come into existence, it attaches immediately to any property acquired by the taxpayer during the existence of the lien. In other words, unlike a typical mortgage, the federal tax lien attaches to a taxpayer’s after-acquired property. If the debt is extinguished, call the IRS lien department and ask for a discharge of the lien. You cannot assume the IRS will do anything automatically.
Disclaimer of California Attorney. Laws differ from state to state. Although the above response is believed to be accurate, it should not be relied upon as any type of legal advice because the information provided is incomplete. It is intended to educate the reader and a more definite answer should be based on a consultation with a lawyer. No attorney client relation is formed with me without a written contract. Good Luck starts with a strategy and a plan. Tax Relief Lawyer. Former financial auditor and controller. Admitted to US Tax Court, Income Tax, IRS representation, Fiduciary income tax returns, Estate and Gift tax returns, Homeowner Association Strategist.
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It is not easy to discharge taxes in a bankruptcy. There are several, complex issues that have to be examined. Be sure to see an attorney who has experience in this area.
This is not legal advice and I am not your attorney until you retain my office. Always consult with an attorney in your area before acting on anything you read on the internet.
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Basically speaking if there is no equity in the home or any other assets, the IRS will release the lien because the lien cannot attach to post-petition equity or post-petition acquired property. I made a video with more info about this situation which you can access at the link below.
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