Gary Busey Emerges from Bankruptcy with $450,000 in Tax Debt
Gary Busey has closed his bankruptcy case, but he still owes about $450,000 in back taxes, a reminder that certain types of debt are not dischargeable in bankruptcy.
The actor, famous for his maniacal grin and roles in cinema classics like “Lethal Weapon,” “Point Break,” “Under Siege” and “Universal Soldier II: Brothers in Arms,” did manage to eliminate about $50,000 in other debts he had hanging over his head owed to utility companies, banks and doctors.
Busey, with dozens of film and television credits to his name, listed only $26,000 of assets, which he was allowed to keep in his Chapter 7 case. He was reportedly philosophical about his financial situation, telling TMZ, “When you have too much, it’s a good feeling to let go. My new hobby is just breaking even.”
His manager celebrated Busey’s (sort of, if you don’t count the $450,000) fresh start, saying, “As with many great institutions, i.e. General Motors, American Airlines and many others who have utilized the strategic business tool called bankruptcy, Gary Busey’s filing is the final chapter in a process that began a few years ago of jettisoning the litter of past unfortunate choices, associations, events and circumstances that visited themselves upon this great American icon.”
Watch that Discharge
Most tax debts are not dischargeable through bankruptcy, although there are exceptions for bills that are older than three years and not based on fraud or evasion. It’s advisable to consult with a good bankruptcy attorney to figure out the best way to proceed.
In fact, it can even be to the debtors advantage to wait before filing to increase the tax debt they might be eligible to jettison. “Sometimes it is advisable for debtors to hold off from filing bankruptcy if we have the opportunity to discharge tax debt if they wait,” attorney Walter F. Benenati of the Law Offices of Walter F. Benenati told Lawyers.com. “If someone owes a tax debt from prior year returns, it may be dischargeable if they filed their tax returns three years prior to the date of filing the bankruptcy. I always advise my clients to request their tax transcripts with a 4506-T IRS form to make sure they can discharge them.”
Other types of debt that a bankruptcy cannot typically wipe out:
- Student loans, except with rare exceptions. Once you take out the loans, you own them for life, thanks to 1976 federal law. Make sure that education is worth it.
- Child support and alimony debts. Sorry, deadbeats, but if the court says you have to pay up to maintain your former family, you have to pay no matter what.
- Debts that a person purposefully acquires with no reasonable expectation of ever being able to pay them off.
- Fines owed to the government, or civil judgements for injuries or death caused by DWI.
- And several other types of debt in limited circumstances.
The same categories for what debt is non-dischargeable, with a few exceptions, generally apply for Chapter 7 bankruptcies, in which assets are liquidated to pay off creditors, and Chapter 13 bankruptcies, in which debtors pay off as much as they can over a three-to-five year repayment plan.