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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 17080
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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I am on the verge of being fired from my federal job, and have

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I am on the verge of being fired from my federal job, and have over $85,000 in credit card debt. I owe IRS $38,000 in back taxes. My only other assets are a car worth less than $10,000, a rental property worth slightly less than the mortgage on it, and a tax-deferred retirment account with about $39,000. I currently receive a state pension, will be eligible for a small federal pension, and am eligible to collect social security. Will I be eligible to declare Chapter 7 bankruptcy after I am fired and eliminate my credit card debt? What about the IRS back taxes? If I were to pay off the BACK taxes with a credit card, could I discharge the RESULTING credit card debt as part of the bankruptcy? tHANKS.

WALLSTREETESQ :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarificati on.

WALLSTREETESQ :

This is a common situation, in terms of a bankruptcy you would be able to discharge the credit card debts through a chapter 7 if you have no income due to the loss of your job,

WALLSTREETESQ :

If the IRS tax debt is several years old it is possible you can have the IRS debts discharged, however that is more complex.

WALLSTREETESQ :

In terms of using a credit card to pay the balance, that is risky, as the trustee can look into the credit card debt to see what was paid and why, and not discharge the credit card as it was used to pay taxes.

WALLSTREETESQ :

You can discharge (wipe out) debts for federal income taxes in Chapter 7 bankruptcy only if all of the following conditions are true:
The taxes are income taxes. Taxes other than income, such as payroll taxes or fraud penalties, can never be eliminated in bankruptcy.
You did not commit fraud or willful evasion. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, such as using a false Social Security number on your tax return, bankruptcy can't help.
The debt is at least three years old. To eliminate a tax debt, the tax return must have been originally due at least three years before you filed for bankruptcy.
You filed a tax return. You must have filed a tax return for the debt you wish to discharge at least two years before filing for bankruptcy.
You pass the "240-day rule." The income tax debt must have been assessed by the IRS at least 240 days before you file your bankruptcy petition, or must not have been assessed yet. (This time limit may be extended if the IRS suspended collection activity because of an offer in compromise or a previous bankruptcy filing.)

WALLSTREETESQ :

http://www.nolo.com/legal-encyclopedia/bankruptcy-tax-debts-eliminating-29550.html

WALLSTREETESQ :

Your pension and IRA accounts would be protected as well.

Customer: replied 4 years ago.

Thanks for your advice. If I am not fired and continue receiving my federal salary of about $160,000/year, could I still discharge my credit card debt through Chapter 7, or will I be ineligible for discharge because of my income?

If your salary is above the State median a chapter 7 would not be allowed, and that would be the case in your situation, however a chapter 13 payment plan may be possible.

However, you would have to pay your debts over a 60 month plan, based upon your monthly income after paying all your monthly expenses.
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