Legal Question in Bankruptcy in Virginia

Re: taxes, bankruptcy

Assuming the income taxes were scheduled, they are discharged if, and only if, (a) the due date of the returns was at least 3 years before you filed the bankruptcy (if filed after 4/15/08, then 2005 and after are NOT dischargeable); (b) you actually filed the returns at least 2 years before filing bankruptcy; (c) the taxes were assessed at least 240 days before filing bankruptcy; and (d) there was no fraud or evasion. If there was a lien filed, the lien remains even if the taxes are discharged.

It sounds like you did this without a lawyer, which was surely a big mistake, as this is an issue that needs to be addressed before filing. But I would be pleased to review this tax situation and see if we can help.

Re: taxes, bankruptcy

Your question relates to the complex issue of the dischargeability of federal and state income tax debts in bankruptcy. And from the very brief set of facts you provide, it is quite possible that some of your taxes should have been discharged in your Chapter 7, while others clearly would not have been discharged.

To lose their priority status and be susceptible of being discharged in bankruptcy, taxes have to meet three tests under sec. 507(a)(8) and 523(a) of the Bankruptcy Code (as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 - the "BAPCPA"). One of those test requires that the tax be at least 3 years old measured from the due date. You said that the tax debts included 2005, which would have been due April 15, 2006. You also said that your bankruptcy was filed in February 2009. Sadly, that was two months too early for the 2005 taxes to have been dischargeable. However, the earlier years would have passed this test, i.e. their due dates were more than three years prior to the filing of your petition. You may find that the problem was simply that the tax authorities were not properly notified of your case. Or there may be other problems with the dischargeability. The rules are complicated, and each tax year must be reviewed on its own, as often some tax years are dischargeable and others are not (as certainly seems to be the case here).

I hope this brief explanation is helpful. More information on these rules is available in the article I wrote a couple of years ago for publication in the Maryland Bar Journal, titled "Dealing with Tax Debts in Bankruptcy After the BAPCPA." You can find that and other articles on this and related subjects in the articles section of my website at www.bjhaynes.com. If I can assist you with this, please contact me.