,

Ask Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA – Does Bankruptcy Discharge Remove Tax Lien? It Depends.

The short answer to the question is that Bankruptcy Discharge by itself does not remove tax lien.

If you filed a Chapter 7 Bankruptcy case, the Chapter 7 Bankruptcy Discharge will eliminate your personal liability of the tax lien assuming that the underlying tax debt is dischargeable in bankruptcy.  This means that the Internal Revenue Service or Franchise Tax Board cannot issue an order for wage garnishment or bank levy.  Moreover, the lien does not apply to future property you acquire after the Bankruptcy Discharge.

However, if the tax debt is not dischargeable, the Internal Revenue Service or Franchise Tax Board can still try to collect from you.

Tax lien attaches to both personal property and real estate in the county that the tax lien is recorded.

If you own significant assets like a house with some equity, you might want to consider filing a Chapter 13 Bankruptcy.  In a Chapter 13 Bankruptcy, you will pay the portion of the tax lien that is secured by the house and other property in your Chapter 13 Bankruptcy plan payments and eliminate the unsecured portion of the tax lien by completing your plan payments and obtaining a Chapter 13 Bankruptcy Discharge.  The unsecured portion of the tax lien is the amount of the tax lien that is in excess of the value of the equity in your house and other properties.  The California homestead exemption does not provide protection against the Internal Revenue Service because of the US Constitution's Supremacy Clause which states that federal law is supreme over state law.  Although the Internal Revenue Service has its own exemption, they are very small compared to California exemptions.

If you have very little assets, you might just file a Chapter 7 Bankruptcy and eliminate the personal liability of the tax lien assuming that the underlying tax debt is dischargeable.

Keep in mind that tax lien do not last forever.  There is a statute of limitation for federal taxes, which is 10 years from the date the taxes were assessed–not the date the lien was recorded.  The date the taxes were assessed are usually the time after you filed your tax return and the Internal Revenue Services has reviewed your return and determined how much taxes you owe.

In some cases, a tax lien will have a low impact on your life.  For more information, call Muoi Chea Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA for a consultation.