Chapter 13 bankruptcy can be a great tool for paying off an IRS tax lien without having to pay the entire amount owed on the lien. However, you must understand that in dealing with the IRS in bankruptcy, there always seems to be exceptions. If you want to know how the law applies to your specific situation, you must sit down with a qualified bankruptcy attorney.
To give you a general idea of how eliminating an IRS tax lien in a Chapter 13 bankruptcy works, let’s assume that you have a $50,000 tax lien filed against you. Let’s also assume that you have filed your tax returns on time every year they have due. This fact is extremely important because the age of your tax debt is determined by the date you file the return. In other words, it is never a good idea to just ignore the IRS and file your tax returns later. Two things you can be sure of in life……..death and that the IRS will eventually catch up to you.
How Strong is an IRS Tax Lien?
Something you must understand is that an IRS tax lien attaches to everything you own. When I say everything you own, I mean absolutely everything you own down to your underwear.
“But wait!” you might say. “They cannot take away my house!”
Yes, they can.
“They cannot take away my only means of transportation!”
Yes, they can.
So if the tax lien is so powerful, how in the world can a Chapter 13 bankruptcy help you be released from the tax lien without paying off the entire balance? The answer to this question depends on the value of of everything you own.
How much do you really own?
Truth be known, most people in American really don’t “own” that much. For example, your car might be worth $25,000.00 but you owe $20,000.00. Your house might be worth $200,000.00 but you owe $195,000.00. Get the picture?
Let’s say everything you own is worth no more than $15,000.00 total. Good news! You may be able to do a Chapter 13 plan were you pay back $15,000.00 to the IRS and completely eliminate the remaining balance. The major factors that will determine how much debt you can eliminate in your bankruptcy case are your monthly income and expenses.
The bottom line is this, if you have a large tax lien filed against, go meet with a local bankruptcy attorney and explore your options.
Other Posts You Might be Interested in Reading: