Taxation & Estate Planning

Will bankruptcy help in getting the IRS to release a levy or seizure?

By howardlevy

If you are having trouble convincing the IRS to release a levy or seizure of your property, bankruptcy may be the solution.

The filing of a bankruptcy creates what is known as an automatic stay against your creditors, including the IRS.   As its name implies, the automatic stay is indeed automatic – the filing of bankruptcy puts a “stay” on the IRS and requires immediate release of a levy or seizure of your property.

The purpose of the stay is to stop the pursuit of you and your property while you seek a fresh start from bankruptcy.

Bankruptcy takes away IRS discretion in releasing a levy or seizure – Section 362(a) of the bankruptcy code requires it.  In most cases, after a bankruptcy has been filed, a levy or seizure should be released within 24 hours.  Bankruptcy also prevents the IRS from filing Federal tax liens.

Relief from IRS collection enforcement is powerful part of our bankruptcy laws, but it is not the limit on what bankruptcy can do.  For example, if you cannot afford to repay the IRS, Chapter 7 bankruptcy can eliminate your taxes.  If you have some ability to make payments back to the IRS, a Chapter 13 bankruptcy can stop the IRS from charging additional interest and penalties on your payments, shorten the length of how long you will be making payments, and lower the amount of your payment.

If you are in a bind with the IRS, and when all else fails, bankruptcy may be the answer to stopping the IRS and reducing your debt load.

Full post as published by IRS and the Law on September 11, 2010 (boomark / email).