IRS personnel feed flow of bankruptcy misinformation

07 Nov IRS personnel feed flow of bankruptcy misinformation

The voice on the phone at the IRS told my freshly filed bankruptcy client flatly that “federal taxes could not be included in any form of bankruptcy.” Sorry, IRS, but that is absolutely untrue.

The automatic stay applies to virtually every creditor trying to collect a debt. Once a bankruptcy is filed, the IRS and state taxing authorities must cease collection actions.

Older taxes can be discharged in full in bankruptcy as well. The rules and the exceptions are complex, but the basic rule for the discharge of taxes is that an income tax is dischargeable three years from when the tax return for that year was due.

I’ve written before about just where the misconceptions about bankruptcy that my clients bring me come from. As I observed, I found the main stream media is the source of bad information about bankruptcy. I can now add the government to the list.
The longer I think about my client’s phone calll, the more I wonder whether repeating this lie is IRS policy or just an under trained employee.

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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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