Month: November 2019

Can Declaring Bankruptcy Discharge Your Tax Debt?

If you fail to pay taxes on your earned income to the Federal or state government, you incur tax debt. Unpaid tax debt can result in the individual facing harsh penalties from the IRS or even jail time. If you are unable to bear the burden of your incurred tax debt, could declaring bankruptcy help discharge it? The short answer – yes, it is possible. The long answer however, is a lot more complicated. Continue reading to know why.

Eligibility for Tax Debt Relief

In order to qualify for a tax debt discharge, there are 5 elements you satisfy under the Federal law:

The 240-Day Rule

The “240-day rule” implies that your tax debt must have been assessed by the IRS at least 240 days before the day you file for bankruptcy. This duration may be extended in case of any past suspension of tax collection by the IRS.

Tax Debt Must Be at Least Three Years Due

To be discharged, the said tax debt must be at least 3 years due before the day you file for bankruptcy.

You Must Have Filed a Tax Return

Without filing a tax return on the tax debt you owe, it is virtually impossible to get a discharge. Furthermore, the tax return filing must be at least 2 years old before you can declare bankruptcy on your tax debt.

No Case of Willful Attempt at Taxes Evasion

If the court deemed you to have committed fraud or willfully evaded taxation, then you are barred from getting a discharge of your tax debt.

The Taxes Are Income Taxes

Lastly, only income tax debt is liable for discharge under bankruptcy. Property, payroll, penalties, and any other tax, apart from income, cannot be wiped out by declaring bankruptcy.

As you can see, getting a discharge on your tax debt is technically possible, but the conditions are rather stringent and may disqualify quite a few cases of tax debts. However, there is another catch worth discussing that may prevent you from fully eliminating the specter of your tax debt.

The Additional Catch

A discharge does not eliminate any past tax liens recorded by the IRS on your property before you filed for bankruptcy. To sell the said property, you will first have to pay up to the IRS.

Seek the Help of a Legal Attorney

Because bankruptcy laws can be complicated to understand, it is best to seek the aid of a legal attorney who can give better advice you on how to go through with your bankruptcy case, and eliminate your tax debt. For a free consultation with an experienced lawyer, book an appointment with us online or call 512-640-3340.

Are Retirement Accounts Exempt in Bankruptcy Cases?

Many people fear filing for bankruptcy, thinking that their retirement accounts might be compromised in the bankruptcy process. However, in the overwhelming majority of cases, your retirement accounts are legally protected from creditors during a bankruptcy case. Continue reading to know more about how retirement accounts are exempt in bankruptcy cases and what the limitations are.

Legal Protections

Since Congress brought changes to the bankruptcy laws in 2005, virtually all ERISA-qualified retirement accounts and pension plan funds are exempt from creditors, including 401(k) accounts. With that being said, it would still be a good idea to check with your employer whether 401(k) is ERISA qualified before filing for bankruptcy.

Chapter 13 Bankruptcy

In Chapter 13 Bankruptcy, your assets are not liquidated, but instead, they are used in judging your ability to pay back your creditors during the court-approved three- to five-year repayment plan. Is the balance in your retirement accounts used in their judgment? The answer is no. All ERISA-qualified retirement accounts are exempt from the judgment, and the balance in them does not affect how much you have to pay in your repayment plan.

Limitations on Legal Protection

Even though your retirement funds are exempt from bankruptcy, there are still a few limitations you should be aware of.

Withdrawn Retirement Benefits

If you withdraw money from your retirement account and use it to purchase an asset or transfer it to a regular account, that amount would no longer be considered protected, and will be used up in your bankruptcy case. Additionally, the monthly payment you receive from it will be figured into your means test qualification in case of Chapter 7 bankruptcy or what portion of your unsecured debts you must repay in case of Chapter 13 bankruptcy.

IRA Limitations

For both IRAs and Roth IRAs, the exempted amount is limited to $1,362,800 per person. If you have more than this in your retirement accounts, the excess funds may be taken by the bankruptcy court to pay back creditors. To account for changes in living expenses, the exempt limit is adjusted every three years, and the next time it will be so is in 2022.


It is essential to know that general savings accounts, investment accounts, and stock option plans are not considered as retirement accounts, and thus, would not be afforded protection during the bankruptcy process. Additionally, if the court deems your retirement account to be fraudulent, it would be disqualified from legal protection.

Are you considering filing for bankruptcy and in need of legal assistance? Book an appointment online or call at 512-640-3340 for a free consultation with a seasoned attorney at the Law Offices of Sean T. Flynn.

What Should You Expect at a 341 Meeting?

A 341 Meeting, also known as a Meeting of Creditors, may sound unnerving for first-timers. However, the process itself is fairly routine and quick. In the meeting, an appointed trustee will oversee your case, confirm your identity, and proceed to ask a series of questions about your bankruptcy paperwork. Here in this article, we give a detailed overview of what to expect at a 341 meeting.

Preparing for the Meeting

Before going to the meeting, make sure to double-check your bankruptcy petition in case you missed something. You should have all the information provided exactly as it, and as accurate as possible (e.g., the value of your assets, your name as it appears on your government issued ID, etc.). The trustee will be looking at the information you provided, and will check for any signs of misleading information or fraud.

What to Bring

The list of documents you need to bring along for the hearing is short. Typically, you are required only to bring along an approved photo I.D, your Social Security card, and any documents that reflect a financial change since you filed the petition.

The Hearing

Most 341 hearings last no more than 10 minutes. During the hearing, the trustee will ask you a series of routine questions which only demand a simple answer from you. Afterward, they may then proceed to ask questions more specific to your case. Creditors might also be present to ask questions about your finances. Although such cases are rare and most of the time, creditors won’t be present at the 341 meetings.

Some Typical Questions They May Ask

Below are some typical questions a trustee may ask during a hearing. However, different cases may involve a different set of questions, and thus, it always a good idea to check with an attorney before your scheduled 341 meeting.

  1. To the best of your knowledge, is all of the information provided in your bankruptcy papers correct?
  2. Did you recheck your bankruptcy petition and schedules before filing with the court?
  3. Have you listed all of your creditors in the petition?
  4. Have you disclosed all of your assets?
  5. Have you ever declared bankruptcy before?
  6. Did anything change since you filed for bankruptcy?
  7. Have you filed all your due tax returns?
  8. Do you have any domestic support obligations such as alimony or child support?
  9. In the last year, have you made any payments to creditors exceeding a total of $600?

Consider hiring an Attorney.

An attorney can help you better prepare for your 341 meeting by finding and fixing any honest mistake or inaccuracy that may be in your bankruptcy paperwork. Presenting accurate and complete information to the trustee is important, otherwise they may ask you to re-file an updated petition or worse, in case they mistakenly view the information you provided as fraudulent, alert the court. For a free consultation with a seasoned attorney, book an appointment online or call at 512-640-3340.

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