In either a chapter 7 or 13, the question will be whether or not the debt is dischargeable. If the tax return was filed more than three years ago, it would be dischargeable. However, if the state came back and reassessed your taxes because of the 401k withdrawal (because you did not claim it on your tax return), and you never went back and filed an amended return, it would not be dischargeable. If it is dischargeble, a chapter 7 will not remove the lien, and it would continue to be attached to any property you owned as of the date you filed the case, but not on property acquired thereafter. Were you to file a chapter 13, and regardless of whether or not the actual tax debt is dischargeable, you could value the lien in an amount equal to your equity in any property, which may end up being a lesser amount, and pay the lien off over time.
As this is a very complicated issue, you need to go in and sit down with a bankruptcy attorney to go over all of the circumstances. As the taxes are old, the state has probably given up on collecting, but the lien will stay until you do something with it, and could eventually give you problems financially in terms of purchasing property or borrowing money.
The above information is general in nature. In order to obtain more specific and legal advice upon which to base your important decisions, please contact our office directly for a free phone or in person consultation. Robert M. Gardner, Jr. Hicks, Massey & Gardner, LLP firstname.lastname@example.org 53 W. Candler St. Or 718 Oak St. Winder, Ga. 30680 Gainesville, Georgia (770) 307-4899 (770) 538-0555 gadebtlaw.com hicksmasseyandgardner.com serving metro Atlanta and all of Northeast Georgia Bankruptcy, Divorce, Personal Injury, Worker’s Compensation, Medical Malpractice, Adoption, Civil and Criminal Litigation
Attorney Gardner has given an excellent answer. The answer is maybe it's dichargeable and maybe it isn't (and they can still collect on it now). To be dischargeable, you needed to have accurately reported the tax due and not paid it, as opposed to having them audit or reassess you for taxes you did not report.
The lien adds complications, as Mr. Gardner noted.
Additionally, your other debts and assets (and income) all affect not just waht happens but what you can or should file. That involves sitting down with all the paperwork with a lawyer.
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If you have property that the tax lien is attached to then you would want to talk to a tax attorney prior to filing bankruptcy. While your personal tax debt will be discharged , if you own any property the lien will stay attached to the property.
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