CH 7 BK finally discharged in AZ - question about listings on CR

[CordusAdmin]

My husband and I owned a business which we lost and my husband personally guaranteed everything.  So, he filed CH 7 and it was just recently discharged.  In the list of creditors, he included two AMEX accounts that were in my name but we used them for business purposes.  These are listed in the final discharge documents.

 

I wait a few months and I pull my CRs and both AMEX accounts are still on my CR with nothing noted that they were discharged in BK.  They just show "charge off" with the amounts past due.  Both of these accounts will fall off my CR 12/2014.

 

Question - I am planning to dispute these with CRA's and state "not mine".  But, since these were in my name and my husband was the one who filed for BK, do I have to do something different?  AZ is a community property state if that makes any difference.

 

Any suggestions would be helpful!

[willingtocope]

I think you need to talk this over with your BK lawyer.  Since only your husband filed BK 7, I'm pretty sure that only his debts were IIB.

[bingo]

The bk code allows for a community discharge.

Also, if they are gonna fall off in 2014 they're likely beyond the SOL.

Talk with your husbands lawyer and have him explain the community discharge.

[willingtocope]

You certainly need to talk to your lawyer...

 

From the little bit of research I've done, in AZ you're required to follow AZ BK laws (rather than federal) and AZ law says that if only one spouse files, any "joint" debts become the responsibiity of the other spouse.

[bingo]

You certainly need to talk to your lawyer...

 

From the little bit of research I've done, in AZ you're required to follow AZ BK laws (rather than federal) and AZ law says that if only one spouse files, any "joint" debts become the responsibiity of the other spouse.

Not sure where you're getting that.

The bk code is federal. States can use their on exemptions or use federal or, allow a petitioner to choose between state or federal but, they still must adhere to the federal bk code.

[willingtocope]

I'm not certain of the accuracy of this site, but:

 

http://www.arizonabankruptcylaw.com/faq.html#19

[despritfreya]

While the community is no longer liable, OP's sole & separate liability is still intact.  A creditor can sue her but simply cannot collect from community assets. 

 

Des.

[jq26]

The debt is still legit.  If your attorney reviewed your husband's credit report and knew that there was joint liability, unless there was a special circumstance, I'm not sure why you didn't file.  When one party files a bankruptcy on joint debt, the other party is still 100% liable (one caveat- in a Chap 13, there is a consumer debt codebtor stay, but not applicable here).

[despritfreya]

The debt is still legit.  If your attorney reviewed your husband's credit report and knew that there was joint liability, unless there was a special circumstance, I'm not sure why you didn't file.  When one party files a bankruptcy on joint debt, the other party is still 100% liable.

Although I disfavor this, there are many reasons why a spouse may decide not to file.  OP is in a community property state.  The community discharge protects OP so long as OP has no sole and separate property.  Even a judgment obtained against her at this time is worthless if there is no sole and separate property.  However, if the community is severed or she comes into sole and separate property during the marriage, such as an inheritance, she will be exposed to collection efforts.

 

Des.

[CordusAdmin]

@jq26 and @despritfreya - I didn't file BK because I didn't really want to trash my credit (although it is pretty bad anyway and I am trying to work on that) and the majority of the debt was in my husband's name.  The only things from the business that were in my name were the AMEX cards.  I am really just hoping they just fall off and go away.  We are not even thinking about buying a house for a couple more years so no rush on cleaning everything up.

 

I am going to talk to our BK attorney.  On a happy note, we just found out a HUGE IRS debt was wiped out by the BK - this was verified by our CPA.  

[willingtocope]

I am going to talk to our BK attorney.  On a happy note, we just found out a HUGE IRS debt was wiped out by the BK - this was verified by our CPA.

 

I'd be interested in how your CPA came to that conclusion.  When we filed BK back in 2004, we were still liable for Personal Income Tax.

[WhoCares1000]

Depends on when the taxes were assessed. If more than 3 years prior to the BK, I believe you can include them in the BK.

[despritfreya]

I didn't file BK because I didn't really want to trash my credit (although it is pretty bad anyway and I am trying to work on that) and the majority of the debt was in my husband's name.  The only things from the business that were in my name were the AMEX cards.  I am really just hoping they just fall off and go away.  We are not even thinking about buying a house for a couple more years so no rush on cleaning everything up.

 

I am going to talk to our BK attorney.  On a happy note, we just found out a HUGE IRS debt was wiped out by the BK - this was verified by our CPA.  

The problem is that if the debt was run up during the marriage, unless it was in the nature of a personal guarantee for a corporate or LLC debt, it is your debt even if you did not sign on the dotted line.  You live in a community property state.  With few exceptions, you debt is your spouse's debt and his debt is your debt.

 

As to the taxes, don't rely on the CPA.  Discuss this with a bk attny and make sure the taxes meet ALL of the prongs for discharging taxes.

 

Des.

[Paradise954]

Depends on when the taxes were assessed. If more than 3 years prior to the BK, I believe you can include them in the BK.

This is correct..... actually there are (5) criterias that the personal income tax must meet in order to be discharged in BK.   I just had mine wiped out by BK and had to meet all the 5 things before they would effectively be eliminated in my BK filing.   A good BK attorney will understand this and know how to wipe out back tax debt.

[despritfreya]

This is correct.....

Your comment is not correct as it appears it was in response to the below quote which leads one to believe that the “assessment” prong of the test is 3 years. 

 

Depends on when the taxes were assessed. If more than 3 years prior to the BK, I believe you can include them in the BK.

 

The assessment prong of the test is 240 days.  As it relates to non-trust type taxes the test is:

 

1.  Tax year at least 3 years old as of the petition date;

2.  Tax returns filed by the taxpayer on time or at least 2 prior to the petition date.  The filing by the taxing agency of a substitute for return will drastically and negatively impact this prong;

3.  Any assessments had to be final at least 240 days prior to the petition date.  The filing of an Offer In Compromise may negatively impact this prong;

4. No fraud or willful attempt to evade payment of tax;

 

There are other issues that impact discharging taxes such as the filing of a tax lien.

 

Des.

 

[Paradise954]

Your comment is not correct as it appears it was in response to the below quote which leads one to believe that the “assessment” prong of the test is 3 years. 

 

 

The assessment prong of the test is 240 days.  As it relates to non-trust type taxes the test is:

 

1.  Tax year at least 3 years old as of the petition date;

2.  Tax returns filed by the taxpayer on time or at least 2 prior to the petition date.  The filing by the taxing agency of a substitute for return will drastically and negatively impact this prong;

3.  Any assessments had to be final at least 240 days prior to the petition date.  The filing of an Offer In Compromise may negatively impact this prong;

4. No fraud or willful attempt to evade payment of tax;

 

There are other issues that impact discharging taxes such as the filing of a tax lien.

 

Des.

While underlying tax owed as part of lien may be discharged thru BK and personal liability for that tax eliminated, the tax lien filed will remain as long as it was filed prior to the date you file bankruptcy.  However, there are ways to get this removed (withdrawn), especially if you have filed a no-asset Chapter 7 bankruptcy.      Here are reasons for a tax lien withdrawl that are listed on IRS form 12277 that you would file with the IRS requesting them to withdraw the tax lien:

 

Reason for requesting withdrawal of the filed Notice of Federal Tax Lien:

 

1. The Notice of Federal Tax Lien was filed prematurely or not in accordance with IRS procedures. 

2. The taxpayer entered into an installment agreement to satisfy the liability for which the lien was imposed

     and the agreement did not provide for a Notice of Federal Tax Lien to be filed. 

3 .The taxpayer is under a Direct Debit Installment Agreement. 

4. Withdrawal will facilitate collection of the tax. 

5. The taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal is in the

    best interest of the taxpayer and the government.

 

If you have no-asset Ch. 7 BK and there are no assets to have, option #5 may be best to work with.   You should consult an experienced BK attorney with this matter.   You may want to state the reason with the IRS for withdrawl as explaining that there are no benefits / reason to leave lien intact as there are no underlying assets to secure the lien (tax was discharged in BK and there are no-assets for IRS to go after to satisfy lien).  Basically, the taxpayer's position is that the lien is serving no purpose other than to harm the credit of the tax payer resulting in limiting their ability to obtain credit, mortgages, employment, etc.   More importantly, and in my opinion, this runs against the BK Code and Rule of gaining a "fresh start" once someone emerges from bankruptcy.    

 

If you choose, you of course could let the lien "naturally" fall off by waiting the ten year period that the lien can be reported on your credit report (although I believe the IRS can renew it and it sticks for another 10 years).   I believe there is a trigger for this and the lien will be withdrawn after this ten year period elapses.    If you Google this subject, you will find a lot of changes that the IRS adopted in their procedure for their filing of tax liens.   e.g. filing liens without reviewing the issue thoroughly, raising the amount owed in total tax before a tax lien could be filed and some others.   As I said, Google the subject of IRS tax lien and you can see the program adopted and the changes made to relieve taxpayers of liens.

 

Again, the best thing to do is seek the advice of an experienced tax attorney as he/she would know how to handle getting a tax lien removed and the appropriate way to do so, being in their client's best interest.

 

P954