Archive for February, 2015

Utah Bankruptcy . . . Income Tax Refunds and Chapter 13

Chapter 13 “adjustment of debts” type of bankruptcy usually allows you to put any pending IRS or Utah tax refund money to a good use.   In our last blog post we wrote about keeping your tax refund in a Chapter 7 “straight bankruptcy.” Chapter 13 can be even more creative. Bankruptcy as “Adjustment of Debts” Chapter 7 is a “liquidation,” but one which, for most people, does not result in anything they own being “liquidated.” That’s because everything they own is protected through property “exemptions.” Same thing with income tax refunds. A tax refund that is owed to you at…

Utah Bankruptcy . . . Income Tax Refunds and Chapter 7

If you are thinking about filing bankruptcy and have a tax refund coming, the Utah bankruptcy trustees will take your refund unless you use it to pay for your bankruptcy or get really good advice about how to spend it before you file   You may have heard that if you file bankruptcy you risk losing your tax refund. Here’s why that won’t happen if you plan it right. Bankruptcy as “Liquidation” Most people who file a Chapter 7 “straight bankruptcy” keep all they own and lose nothing to the bankruptcy trustee. That’s because for most people everything they own is…

Utah Bankruptcy . . . Back Property Taxes on Your Home

Not paying property taxes is almost always a breach of your mortgage. Chapter 13 protects allows you to catch up and keep your Utah home.   Property Tax Foreclosure Is Not Usually the More Pressing Concern If you have fallen a year behind on your property taxes, you likely have quite a bit of time before you would lose the property to a property tax foreclosure. If the documents you received don’t make perfectly clear how long you have, be sure to find out from an attorney. But assuming you have a mortgage, almost always your bigger and more immediate…

Utah Bankruptcy . . . Withholding Taxes Owed on Behalf of an Employee

Chapter 7 or 13 may provide your best solution even though Employee withholding taxes can’t be written off in bankruptcy.    Withholding Taxes Are Special If you have a business, or recently had one, with one or more employees, and you or your business withdrew money from the employees’ paycheck but did not send that withheld money on to the IRS or other appropriate state or local tax agency, most likely that tax agency is chasing you hard for payment of that money. They do not take kindly to not getting paid what are often referred to as “trust fund…

Utah Bankruptcy . . . a Recorded Income Tax Lien Partially Secured by Your Assets

In Utah, how do you get rid of a tax lien that attaches to something you own worth less than the amount of the tax you owe?   Our last 2 blog posts discussed what happens if the IRS or state tax entity records a tax lien before you file bankruptcy. First, if that tax lien attaches to nothing of value—such as a home without any equity—bankruptcy provides a way to get that lien released. Second, if a tax lien attaches to something worth more than the tax that the lien is enforcing, bankruptcy provides a way to protect what…

Utah Bankurptcy . . . a Recorded Income Tax Lien that Is Fully Secured by Your Assets

Depending on whether a tax lien attaches to assets worth more than the amount of the underlying tax, it could make either a small or a huge difference.   A Potentially Secured Tax Debt The recording of an income tax lien potentially turns an unsecured tax debt into one secured by some of your property and possessions. Whether that tax debt actually becomes secured or not turns on whether that lien attaches to anything of value, and whether the amount of that value covers the amount of the tax at issue. Assume, for example, that you owed income taxes on…

Uath Bankruptcy . . . a Recorded Income Tax Lien that Attaches to No Equity

A Chapter 13 bankruptcy can often get rid of a recorded tax lien.  These liens against your home hurt even if the home has no equity.    The Adverse Effect of a Recorded Tax Lien In our last blog post we explained why the recording of a tax lien by the IRS or state tax authority can be so bad for you. We emphasized the advantage of filing a bankruptcy case before a tax lien is recorded in order to prevent its recording and the bad consequences that flow from it. But what if the tax lien has already been

Utah Bankruptcy . . . and a Recorded Income Tax Lien

Bankruptcy and preventing the damage of an IRS or state tax lien.      The Effect of a Recorded Tax Lien The IRS or state tax authority recording of an income tax lien can have huge consequences for you, both outside and inside bankruptcy. Unlike most creditors, these liens can encumber your home, your vehicle and other personal effects, your business assets, all without a lawsuit being filed. A record of the tax lien goes onto your credit record, accessible not just to other creditors, but also to prospective employers and insurers. It’s likely more damaging than most adverse credit…

Utah Bankruptcy: . . . Newer State and Federal Income Tax Debts

Bankruptcy does not write-off newer income taxes, but Chapter 7 and Chapter 13 can still help.   Our last blog post was about older income taxes that can be “discharged” (permanently written off) in bankruptcy if they meet certain conditions. Now this blog post is instead about those, generally newer, taxes that can’t be discharged. Whether a Debt Can be Discharged is Only a Small Part of the Story It’s easy to get fixated about whether a debt—a tax or otherwise—is or is not going to be discharged in bankruptcy, and then using that to decide whether you should file…

How Bankruptcy Handles . . . Utah and Federal Income Tax Debts

Bankruptcy writes off income taxes for Utah debtors under certain conditions.    Income taxes owed to the IRS and state tax agencies can be legally written off (“discharged”) if they meet certain conditions, conditions which are sometimes not all that hard to meet. In this blog post we briefly describe those conditions, touch on some practical challenges in meeting these conditions, and then summarize how Chapter 7 and Chapter 13 handle these “dischargeable” tax debts.    The Two Main Conditions for Discharging Income Taxes: It’s Mostly Just a Matter of Time The conditions for discharging an income tax in most situations…