Bankruptcy Process

Letter to “Ask Leon”

If I go to bankruptcy and I want to buy a house in the near future. Does that impact me very negatively? What other bad things I may expect? What benefits I will get? How difficult is to get protected by the bankrupt? I owe back taxes, is that a big problem? Thank you

Leon Says…

You may be able to discharge the taxes in bankruptcy.

Just so you know income taxes may discharge if all of the following criteria are met:

A. The taxes are more than three years old at the time the Bankruptcy was filed. (The three-year period begins to run from the time the returns were due, usually April 15th of the following year plus any periods of extension.);

B. If the return was not filed on time, more than two years has expired since the return was filed;

C. If there was an assessment, more than 240 days have expired from the date of the assessment;

D. There has been no fraud.

E. IF THERE ARE RECORDED TAX LIENS: The taxing agency may ask you to pay the amount of the exempt property that you have scheduled in your bankruptcy petition before they release any liens.

To get your tax history, do the following: Call the IRS priority hotline at telephone number (800) 829-1040 and ask them for a report called: MFTRA-X. Tell them
you want the MFTRA-X for each year that you owe taxes. They will mail you the reports, and might even agree to fax them to you. Your bankruptcy attorney will want to review those transcripts as part of the bankruptcy consultation.

I do not have enough information from you to answer the other questions. However, people generally recover quickly from bankruptcy and from what I see; most people will reestablish what ever level of credit is appropriate for their level of income within a few years of filing bankruptcy.