Down and out

In a lawsuit against a bankruptcy attorney brought by former bankruptcy debtors, the debtors claimed that they are now liable to pay tax debt which was thought to be discharged in bankruptcy. The suit was filed pro se and the couple claims that, for five years, they were under the impression that “the debt in favor of the [IRS] was discharged and dischargeable” from the moment they hired Lightfoot in 2005.

According to the lawsuit, the Cassaras became aware that their debt to the IRS “was not dischargeable” in March 2010, and the couple “was caused to pay the [IRS] the sum of $80,245.57,” a “sum which would not have been due but for the errors and omissions of” Lightfoot.

The lawsuit further claims that the bankruptcy attorney failed to include the IRS on a mailing list to creditors and also failed to inform the IRS of the debtors’ bankruptcy filing.   In the end the bankruptcy debtors are facing a huge tax debt which includes penalties and fees which could have been avoided.

Below are a few tips on how other debtors can avoid the disaster these debtors are facing:

  1. First and foremost, bankruptcy debtors need to make sure they are hiring a competent bankruptcy attorney.  This is not to say that competent bankruptcy attorneys don’t make mistakes; but the fact is that most competent attorneys won’t make the type of simple but deadly mistakes allegedly made in this bankruptcy case.
  2. Review your bankruptcy paperwork for errors or omissions that you can spot.  Simple things like making sure that all of your debts are included on the schedules will go a long way in making sure that your bases are covered in your bankruptcy case.
  3. Don’t stick your head in the sand after your bankruptcy discharge.  There is just no way in the world that the IRS has been quiet about this couple’s tax debt for five years.  Most likely they have at least filed a lien which would have showed up on their credit report.  Make sure that you check your credit report and even double check with your bankruptcy attorney and your major creditors to make sure that those debts have in fact been discharged.

(source: http://www.louisianarecord.com/news/232785-couple-claims-lawyer-failed-to-inform-irs-of-their-chapter-7-case )