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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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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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.
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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.
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.
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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.