Can you still owe money once you've filed Chatper 7 Bankruptcy? ?

Question

My parents filed chapter 7 bankruptcy including their home at the end of 2001. The bankruptcy was discharged in 02 and they relinquished their home(they did not reaffirm the debt). Recently my parents received a letter from the IRS stating they owe 15,000 due to a 1099 form the home lenders filled out for their loss from foreclosure.I thought once you were discharged you are then released from personal liability. What am I missing?

Answer 1

Tax debts are not discharged under U.S. Bankruptcy law.  At least that is my understanding.  The Bankruptcy Code is changed so often that quit trying to offer assistance in that area.  I am sorry to report what I think is the correct assessment of the problem.  Candidly, I would consider consulting back with the lawyer in the original bankruptcy filing.  I think. as a backup option, you can negotiate the debt yourself or with a tax law expert.  I am confused as to why the IRS is representing the lender on the real estate.  Further, your comment about not reaffirming their interest in the foreclosed home.  I would have an IRS conference with counsel.  

Answer 2

Bankruptcy does not discharge taxes or obligations involving fraud.

I doubt that the home lender can make such a belated claim or that it would generate a tax obligation for your parents in this situation.

Your parents had best, however, speak with a good tax lawyer.

IRS will not withdraw their claim unless you prove that it is not legal.

Then too, I think the IRS is too late to file such a claim.

Usually the limit is 3 years.

Answer 3

when you file for bankruptcy it only shields you from certain private debs. You still have to pay taxes, child support, and alimony.

Answer 4

The same thing happened to us! Heh! you filed bankruptcy! you don't have anything! The house went back! See the people who did your bankruptcy.  I didn't pay a penny.

Answer 5

If you failed to list a creditor you keep the debt. In this case however, it appears that there were taxes due on the property, taxes don't get discharged by bankruptcy, and the company that foreclosed is not responsible for the taxable consequences of the previous owner.