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How Fines Levied by the Government Affect Your Bankruptcy: Info from a Bankruptcy Attorney

There are some tax debts you can eliminate by filing for Chapter 7 bankruptcy in Montgomery County, TX. However, if you have a tax lien on your property, that is a different matter entirely. While it is not impossible to remove tax liens through bankruptcy proceedings, it is certainly uncommon.

Here is some information from a bankruptcy attorney you should know about how fines levied by the government can affect your bankruptcy proceedings.

Tax liens and Chapter 7 bankruptcy in Montgomery County, TX

A tax lien is a type of lien that ensures the government’s ability and right to collect any applicable taxes or penalties you have not paid back. If you sell off the property, the lien allows the government agency in question to take a cut from the proceeds of the sale. The agency is also able to seize the property to get reimbursed for those unpaid taxes.

There are some types of tax debts you can get discharged, but keep in mind that if the IRS or any other similar taxing authority has a lien against your property, the lien will remain even if you’re able to eliminate the debt as part of your bankruptcy proceedings. The taxing authority will not be able to go after your bank account, but when you sell the property, you’ll still need to pay off the lien. This also means that if you pass away before selling the property, your loved ones will be responsible for paying the lien out of the estate.

There are some circumstances in which you can challenge a tax lien with the assistance of a skilled bankruptcy attorney. Here are just a few examples of some of the grounds in which a challenge may be reasonable and feasible:

  • The lien on the property has existed for more than 10 years
  • The taxing authority recorded the lien on your property after the automatic stay that comes with bankruptcy was put into place
  • The IRS never actually officially recorded the lien, making it invalid
  • The property lien was either recorded against the wrong property or in the wrong county

If none of these challenges work for you, the best way to remove the tax lien is to simply pay back the taxes you owe. You can do this with a lump sum payment or work with the taxing authority that placed the lien to arrange a repayment plan to pay back your taxes with regular installments. If none of the above options works for you, then this sort of lien repayment plan is likely going to be the only option available to you.

With this in mind, if you have a lien on your property and are planning on filing for Chapter 7 bankruptcy in Montgomery County, TX, you should consult with your bankruptcy attorney about whether or not you qualify for any of the above circumstances in which a challenge on the lien would be acceptable. For more information about how to best proceed with your case, contact our team today.

James R. Jones, Attorney at Law.
James Jones, Esq.

Mr. Jones’ practice concentrates on business and consumer Chapter 7 bankruptcy
and he has been an attorney of record in several hundred such cases.