Tag Archives: dischargeable

Dealing with back income tax in bankruptcy

By: Jeena Cho, San Francisco bankruptcy attorney

Did you know you can get rid of certain back income taxes (both Federal and State) in bankruptcy? Oftentimes, clients falsely believe they can never discharge taxes through bankruptcy. As the saying goes… “death and taxes.”

In general, taxes can be discharged in bankruptcy if it has been at least:

  • Three years from due date of the return;
  • Two years from actual filing of the return (Substitute for Returns do not count);
  • 240 days from an assessment;
  • Returns must not be fraudulent and there must be no evasion.

As you can see, timing is critical when performing the above analysis. File on the wrong date - you might get stuck with tax debt that otherwise could have been discharged had you waited. In addition to reviewing your returns, requesting a tax transcript is critical in determining the timeline.

If you have recent tax debt that we can’t discharge, Chapter 13 can be a good alternative. In Chapter 13, you can get up to 5 years to repay the portion of the income tax that is non-dischargeable.

Photo credit: alancleaver

Forgetting to List a Creditor in Bankruptcy

Forgetting to List a Creditor in BankruptcyBy Jeff Curl

Occasionally I get a panicked call from a client on forgetting to list a creditor in bankruptcy. They received the discharge, but want to know if they are now responsible for the omitted debt. This raises a few issues.

Forgetting to List a Creditor in Bankruptcy - Was the Debt Dischargeable?

It first depends upon the type of debt. Debts in bankruptcy are either dischargeable (you can get rid of it) or nondischargeable (you’re stuck with it). Typical dischargeable debts include medical bills and credit cards. Typical nondischargeable debts include student loans, child support and recent taxes. If the debt omitted was something you could not discharge in the first place like student loans, you are stuck with it no matter what.

Was it a Chapter 7 “No Asset” Case?

But what if it was dischargeable? What if you forgot about the $8,000 credit card you have not used for a year or two? If you filed a Chapter 7 case, but were not able to exempt and keep all of your assets, the debt would survive. Luckily, the majority of those cases are “no-asset” cases. This means you were able to exempt and keep all of your assets; the trustee took nothing from you to pay your creditors.

If your debt was dischargeable in the first place, and if your case was the typical Chapter 7 “no-asset” case, those of us in the Ninth Circuit, including California, are in luck. Here’s some bankruptcy nerd talk: under the Ninth Circuit case of In re Beezley (recently followed by the Bankruptcy Appellate Panel in In re Heilman), the forgotten creditor has no claim against you. Your debt is discharged. It was a no harm, no foul situation because the debt was dischargeable and the creditor would not have received anything even if it was listed.

Take Immediate Action

If the omission of a creditor is discovered while the case is open, the petition should be amended immediately to add the creditor, and that creditor should be given notice as well. This is true even if you filed a Chapter 7 no asset case.