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Lev, Tax Advisor
Category: Bankruptcy Law
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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Customer Question

I am in the process of filing chapter 7. 2 days before my trustee meeting, my attorney informed me that in order to include federal taxes (owed between 2002 and 2008-fully dischargeable) He would need to file and go through a separate adversarial process in a separate federal court in order to "strip the tax lien". This would require an additional filing fee and another 1,000 in legal fees! My understanding was that since I do not own real property, there is noting to attach and in standard BK the underlining IRS debt would be discharged. Is there any advantage in "striping the tax lien"? Also, I filed my tax return after I filed BK but the IRS kept the refund and applied it to the outstanding debt. Isnt there an automatic collections stay? Will I be able to recoup the refund?

Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Wendy-Mod replied 3 years ago.
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Expert:  Lev replied 3 years ago.

Hi and welcome to Just Answer!
In general - you may discharge tax debt in the bankruptcy procedure. However - there are certain requirements. For income tax discharge purposes following are rules:
-- The tax return was due at least three years ago.
-- You filed the tax return two years ago or before.
-- The tax liability was assessed at least 240 before filing a petition.
-- There was no tax fraud involved.
-- There is no tax evasion.

However - you can't discharge prior recorded tax liens in the bankruptcy procedure. if the IRS recorded a tax lien on your property before you file for bankruptcy - the lien will remain on the property even the tax debt would be discharged in the bankruptcy procedure.

If you do not have a tax lien or levy recorded - I do not think you need to "strip the tax lien" - that procedure is used to remove registered tax lien.

Also refund that was already taken out to pay outstanding tax debt would not be recovered.

While you are under bankruptcy protection - the IRS may not enforce collection - means - will not register a lien and will not levy your income. But that doesn't eliminate you tax debt - and the IRS would not issue any refund.

Sorry if you expected differently.

Let me know if you need any help,

Customer: replied 3 years ago.

Thank you for the reply. My taxes were from 2002 - 2008 and meet all of the criteria for discharge. I've had my 341 meeting and the IRS was listed as one of the creditors.


To clarify, I do have a registered tax lien dating from 2007. I do not own real estate. Is it ok to discharge the debt and not remove the lien? What would be the advantage of removing the lien if it will continue to show on my credit profile anyway? How is this handled in a typical no asset chapter 7?


Thanks in advance.

Expert:  Lev replied 3 years ago.
I am not clear how you have a registered tax lien and do not have any assets?
The tax lien is registered on the asset.
So your informations seems as contradicting.
Please clarify.
Customer: replied 3 years ago.

This is from the IRS website:


A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:

  • Assesses your liability;

  • Sends you a bill that explains how much you owe (Notice and Demand for Payment); and

  • You neglect or refuse to fully pay the debt in time.

The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property

Expert:  Lev replied 3 years ago.

That is correct - but you also mentioned - "I do not own real estate"

So my question is - against which property the federal tax lien is registered?


Customer: replied 3 years ago.

This is the crux of the issue. As I said, my atty wants me to go through an expensive and separate adversarial process in addition to the chapter 7 to strip the lien. I am trying to figure out if it is necessary.


IRS say:

Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien.


Bankruptcy — If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue after the bankruptcy.




Expert:  Lev replied 3 years ago.

If you have no assets - I do not see how you may have tax liens attached to your assets - so I assume - there is no tax lien.

If there is no tax lien - there is no need for "lien stripping"

The "lien stripping" - means - the lien amount would be reduced to the property value.

However since - there is no property and there is no tax lien in effect - the "lien stripping" seems as irrelevant.

I would ask your attorney for clarification.

Customer: replied 3 years ago.

Thanks for your assistance however I consider the question to be only partly answered. My attorney has been unable to explain to my satisfaction which is why I turned to this forum. BTW, below is the info pulled directly from my credit file.


500 4TH AVE
SEATTLE , WA 98104
No phone number available
Identification Number:

Address Identification Number:
Status: Federal tax lien filed.

Date Filed:
Date Resolved:

Claim Amount:
Liability Amount:


Expert:  Lev replied 3 years ago.

According to the credit report information - a federal tax lien is filled against your property which you own - and it is still in effect.

If you do not own that property - the lien has no effect on you or your credit report is not updated as resolved.

Please ask for clarification as needed.

Customer: replied 3 years ago.
Relist: Inaccurate answer.
Expert:  Lev replied 3 years ago.
Please be sure to ask for clarification if needed.

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