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Law Offices of Chance M. McGhee

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Income tax debt may be discharged—legally written off—in a Chapter 7 case. It just needs to meet some conditions.

Our last blog posts have been about “priority” debts, such as child/spousal support and income taxes. A key point has been that your Chapter 7 trustee pays priority debts ahead of your other debts. But that’s irrelevant if the trustee doesn’t have any money to pay ANY of your debts. And that’s what happens in most Chapter 7 cases. That’s because in most cases everything the debtor owns is protected through property exemptions.

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Chapter 7 sometimes doesn’t give much help with tax liens. But Chapter 13 hugely helps with tax liens already recorded, and stops new liens.

Today we cover the 5th of the 10 ways that Chapter 13 helps you keep your home, which we listed in a recent blog post. Here’s how we had introduced this one:

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A tax lien fully encumbered by the equity in your home is dangerous. Chapter 13 may be your best option.

Today we finish a short series of blog posts on income tax liens recorded against your home. Last time we explained how to use Chapter 13 “adjustment of debts” to get the release of a tax lien when there is SOME equity in your home to secure the tax debt. The time before we got into what happens when there’s NO equity in your home to which the tax lien can attach. Today is about tax liens that secure the entire tax debt because the amount of home equity is enough to cover the ENTIRE tax.

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Chapter 13 forces the IRS/state to accept only partial payment on an income tax debt that is only partially secured by a tax lien.

We’re in a short series of blog posts on income tax liens recorded against your home. Last time we explained how to use Chapter 13 “adjustment of debts” to get the release of a tax lien when there is no equity in your home securing that tax lien. That happens when the mortgage(s), property taxes, and other prior liens soak up the whole value of the home.

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Once an income tax lien is recorded, Chapter 13 gives you a tool that may enable you to pay no more and yet get a release of that tax lien.

Our last blog post was about using bankruptcy to prevent the IRS or state income tax authority from recording a tax lien on your home. But what if a tax lien has already been recorded?

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