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September 15, 2010

I Owe the IRS Taxes… Can I make payments? What if I’m in Bankruptcy?

Filed under: Bankruptcy,Chapter 7 Bankruptcy,Taxes — Barry @ 8:08 am

Your problem is not unusual. Whether you call it an installment agreement, payment agreement, payment option or a payment plan, the idea is the same — you make payments on the taxes you owe. While that may sound like a good idea, you can save money by paying the full amount you owe as quickly as possible to reduce the interest and penalties you will be charged. Those who cannot clear up their tax debts immediately may find that an installment agreement allows for a reasonable payment option. Installment agreements allow the taxpayer to make smaller, more manageable payments while still paying the tax in full.
Under normal circumstances, (i.e., you are not in bankruptcy) you will need to determine whether you owe more than $25,000 including taxes, penalty and interest. If you owe less than that amount you Online Payment Agreement (OPA) or call the number on the bill or notice (have the bill or notice available, along with the social security number). A fill-in Request for Installment Agreement, Form 9465 (PDF), is also available online and can be mailed to the address on the bill.
If you owe more than $25,000 you will need to file a Collection Information Statement, Form 433F with the IRS. If you are in this situation you may wish to speak to a professional.
Bankruptcy
If you are in bankruptcy you need to communicate with the IRS. You should not file the Form 9465, but should contact the IRS at 1-800-829-1040 to obtain the phone number for your local bankruptcy insolvency unit. You may also want to consider filing an Offer in Compromise. (More on offers in compromise will be covered in another post.) Again, if you are in bankruptcy and cannot pay your taxes, you need to communicate with the IRS or have your attorney do this for you.

February 16, 2010

Do I need to list all my debts on my bankruptcy?

Clients and prospective clients  aways ask whether they need to list all their debts in their bankruptcy.  The simple answer is YES; you must list all your debts.  You must list all debts whether they are secured or unsecured.

Just because you have listed all your debts does not mean that you cannot reaffirm them, or decide (outside of bankruptcy) to pay them in part or in full at any time, either before or after receiving your discharge.  However, this gives you flexibility in determining which if any debt you are going to repay.

Often a client will ask whether they cannot list a credit card with the intent to keep it.  Frankly, the issuer will close most credit cards within days of their becoming aware of your filing.  Remember, the Credit Reporting Agencies (Experian, Equifax, and TransUnion) scan the bankruptcy filing system in live time and report the filings to their clients (most of your creditors).  Most of the time, a credit issuer will cancel your account whether or not you owe them anything.

Since you cannot assure which creditors will find out about your filing, you should always include them in your list of creditors.

One caveat, failing to disclose a creditor can:

  1. Prevent your discharge to that creditor (in certain circumstances), or
  2. Prevent you receiving any discharge at all… Failing to list every creditor may constitute perjury or committing fraud on the Bankruptcy Court, which would deny you of any discharge.
  3. The best policy is to list every debt, including what you owe to your mother, your brother, Aunt Sally, or Uncle Sam.  If the Court discharges a debt, you may still decide to pay that creditor later.Please note that deciding to pay a creditor, i.e., your Aunt Sally before you file is also a problem and may allow the bankruptcy court to order your Aunt Sally to pay the money back to the court. (There are different time limits for different creditors; this will be covered in a later post.)

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