IRS Adversary Proceedings in Bankruptcy

On Behalf of | Nov 15, 2010 | Bankruptcy |

It has been our experience that problems arise unless you deal directly with the IRS from the outset.  If your tax returns have been on file for more than three (3) years and your case happens to fall within the exception to the general rule that taxes are not dischargeable in bankruptcy, then it is important to specifically notify the IRS that the taxes have been discharged.  Otherwise, the IRS typically takes the position that they are never discharged. 

As such, it is often necessary to file an Adversary Proceeding and obtain a Federal Court Order against the IRS advising them that they have been discharged.  An Adversary Proceeding is like filing a separate lawsuit against the IRS.  If the amount of your potential tax liability is substantial, then we feel it is advisable to file this action against the IRS.  When our eligible clients do not obtain such a specific Order from a Federal Judge, we have found it common for the IRS to continue to try to levy on their accounts and/or to withhold tax refunds to which they would otherwise be entitled.