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IRS could be singing the blues about Warwick's bankruptcy filing

People who are considering filing for bankruptcy often feel as if they would do so as a last resort. What often happens is that people are dissuaded from filing because they associate bankruptcy with the end -- when in fact, in many ways, it is the beginning; bankruptcy is a fresh financial start for someone who needs it.

Tennessee residents who are faced with overwhelming debt might consider filing for Chapter 7 bankruptcy. Frequently in this type of bankruptcy -- which you might hear referred to as a straight bankruptcy -- most or all of a person's debt is discharged.

This is what singer Dionne Warwick did. She filed for bankruptcy protection in March after bad investments and a career lull left her unable to satisfy her creditors. One of the entities to which she owes money is the Internal Revenue Service.

As a result, the IRS -- which is owed up to $7 million in back taxes -- is trying to get approval in bankruptcy court to go after two companies associated with Warwick: Star Girl Productions and KMBA Productions.

However, attorneys for Warwick say those companies handle the administration of Warwick's singing career and pay her wages, but she has no financial or managerial interest in them.

As a result, Warwick's attorneys say, the IRS has no standing to pursue the companies for money. And they say that all of Warwick's tax liability, except for about $25,000, is dischargeable in bankruptcy. A judge is scheduled to hear about the dispute in the coming days.

Source:  The Wall Street Journal, "Dionne Warwick Takes on the IRS," Jacqueline Palank, June 10, 2013

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