Bankruptcy Chapter 7 & 13

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Tax Liens & Levies

Both the Internal Revenue Service and in Arizona, the Department of Revenue can take wages, bank accounts, and other property through a levy. The government does not need a judgment, and it is not limited to one-fourth of your pay.

Chapter 7 and Chapter 13 stop tax levies. Many taxes are not discharged under Chapter 7 [11 USC �523(a)(1); see also 11 USC �507(a)(8)].  The government will still be able to collect those taxes after a Chapter 7 bankruptcy is finished.  In Chapter 13, taxes will usually be paid from the plan payments [11 USC �1322(a)(2), 11 USC �507(a)(8)].

What stops the liens and levies?  See Protection from Creditors.

What if you had a prior bankruptcy within the last year?  See the Caution on the Protection from Creditors page.

What if you had a prior bankruptcy within the last 8 years?  See Who is Eligible.

How much can IRS take from my pay check?

IRS can take all of your check, except the amount exempt under Federal law.  The amount that IRS will leave--the exempt amount--is based on your filing status and the number of dependants claimed.  The exact amounts are stated in IRS Publication 1494 [Adobe PDF reader required].  Here are a couple of examples from the 2004 publication:

If you are filing single, claiming one dependent, IRS must leave you $152.88 from each week's pay.

If you are married, filing jointly and claiming two dependents, IRS must leave you $305.77 from each week's pay.  If you are claiming four dependants the amount left is increased to $425.00 from a week's pay.


This page was last revised: 02/18/09