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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 174
Experience:  Managing Attorney for one of the largest consumer bankruptcy firms in America.
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Hello- I am on a payment plan for 2011 taxes with the State

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I am on a payment plan for 2011 taxes with the State of SC and The IRS. I owe 9K to the state and 19K to the Fed. I am about to do a Chapter 13 Bankruptcy. Does the 3 year, 2 year, 240 day rule apply here?
I am a bankruptcy attorney and I would be happy to assist you. Unfortunately, the taxes you are paying on are not dischargeable and they will be brought into the Chapter 13 plan. In order for the tax to be dischargeable, the following rules must be met: 1) The due date for filing a tax return is at least three years ago. 2) The tax return was filed at least two years ago. 3) The tax assessment is at least 240 days old. 4) The tax return was not fraudulent. 5) The taxpayer is not guilty of tax evasion. Your tax return was filed for 2011 in 2012, therefore it is not yet 2 years old. Additionally, the tax assessment date is usually done right before you start making payments, therefore it is unlikely it is 240 days old. In order to know exactly when your tax assessment was done, you should get a statement from the IRS and bring it to your bankruptcy attorney for evaluation.

The good side is that since you are required to pay the taxes in the plan, they will be spread over 3 or 5 years (depending on which plan you choose) and this may lower your payment. Your payment plan with the IRS will end and the payments will instead be made to the Ch. 13 trustee. Additionally, since a portion of your plan payment will be paid to the IRS and SC, it will lower the amount you will be paying to the unsecured creditors. This means you will have a larger discharge of your debt at the end.

I hope my answer has assisted you and that you will leave me a positive rating.
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