Tag: discharge

That said, I have seen the IRS spontaneously release a lien securing discharged debt, but I have no idea why they did it.

A tax lien does not apply to assets acquired after the bankruptcy is filed, so, if the debtor does not own real property or investments (retirement or otherwise), the remaining tax lien is not that burdensome. Car titles do not show the tax lien. It is against the law to sell any assets covered by the lien (i.e., all assets), so the client’s citizenship will prevent him from selling his vehicles. However, he can just drive them until they wear out, unless the tax authority seizes them, which is unusual.

If the debtor owns real property, he can use a chapter 13 plan that “crams down” the tax lien to its value, which is the equity in his house and vehicles and all assets. Clothes and furniture are not worth much. Cram-down works on tax liens same as vehicle liens. When the debtor finishes his chapter 13 plan, the tax lien is considered satisfied.

The IRS and Oklahoma Tax Commission used to have voluntary programs allowing a chapter 7 debtor to set up an arrangement to obtain a release of a tax lien by paying the value of his equity in all his assets in installments. In other words, a chapter 7 cram-down. If this option would be helpful to a client, I can speak with the tax authorities to determine whether these programs still exist.