Tax liens after bankruptcy

23 Jun Tax liens after bankruptcy

Despite my repetition of the bankruptcy maxim that liens survive the bankruptcy discharge, the client panicked when they were “invited” to meeting with the IRS. The revenue officer wanted to discuss their tax liens, which the letter identified in the prebankruptcy amount (in this case, tens of thousands of dollars).

A lien is a right in property, real property or personal property. Although the tax debt in my case was for $77,000, the only part of that huge sum that was secured was equal to the value of the client’s assets at the filing of the case.

So, that big, scary “tax lien” turns out to be secured by the debtor’s household goods, a used up car, and a small IRA. Not an insurmountable problem.
When the underlying tax debt is discharged in the bankruptcy, the lien that has been recorded does not attach to assets the client acquires after the bankruptcy case is filed. The IRS’s rights are confined to the assets that existed on the date the case was commenced.

More later on your choices as to tax liens that survive the discharge.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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