Posted by B.L.Renfrow on July 05, 2003 at 15:07:21:
No…as I understand it, the seller has to be insolvent at the time the 1099 is issued. If the sale was closed before he filed BK, I think there is a rule about taxes not being dischargeable in a BK unless they are more than three years old. However, I am certainly not an expert in this area, so if one is contemplating such a deal, one ought to seek advice from someone who is.
As for the type of BK, I know it applies with a chapter 7. I’ve seen discussion about whether it does with a 13, but I’ve never seen the definitive answer. (However, I’ve never taken time to search the tax code either.)
As for the risk of set-aside, that’s why you get the trustee’s approval before proceeding. As long as the trustee has approved, you don’t have to worry about it.