Are the Ch 13 unsecured debt limits written in stone?

[URODOC]

My main interest in pursuing Ch 13 is to deal with business and tax debt. My business debt is 150k, some of which I have been paying off installment-wise and my tax debt is 250k, half of which is over 3 years old. Most of my debt was incurred from my surgical practice which I closed in Dec. Since then I have been employed by a hospital. My income far exceeds the limits for Ch 7 and the unsecured debt is over the limit for Ch 13.
My only secured debt is my mortgage and a car loan. My credit card debit is no more than 10k.
I wanted to do Ch 13 to avoid a payment plan with the IRS which I know will never end due to the ongoing interest and penalties.
Unfortunately this past week, after reviewing my last tax return and the pay stubs for my current position, the IRS, without warning or notice, levyed a wage garnishment to take 85% of my salary.
Although my CPA (POA) had been talking to the Revenue officer, they have refused to return multiple phone calls over the past week.
I am seeing a bankruptcy atty. this Tuesday.
I hate to get forced into a bankruptcy just to get a stay lifted.
Anybody have any ideas?

[RunningMan]

I had a similar situation to yours and spent over $7000 for a tax attorney to negotiate with the IRS for me. I ended up with a payment I could not afford and no break on the amount I owed. As you pointed out, the interested kept accruing too. We just ignored the other creditors and blocked their phone calls. One of our creditors for a business line of credit got a judgement against me and summoned me to court to bring a list of assets. I had to file on short notice also, but it has brought a lot of sanity to our lives. It was the right thing to do.

[URODOC]

Thanks for your input. Did you do Ch 13 or 7?
I understand that "non-consumer" debt can be done in Ch 7 regardless of income?

[RunningMan]

We filed a chapter 13. You are correct that non-consumer debt can be done in a chapter 7, but you can't discharge the tax debt that is less than three years old. You will still owe it. We are also using the chapter 13 to pay arrears on our mortgage and strip the second because our first is under water.

[lrprn]

To file Ch 7, regardless of your income, an experienced bk attorney has to complete the required Means Test and Schedules to show that you don't have enough disposable income left over after paying your secured and tax debts to pay more than about $160/month to your non-secured creditors.

The current Ch 13 upper debt limits are $336,900 in unsecured debts or $1,010,650 in secured debts. These limits are set by the bk law so aren't negotiable.

You said you owe $150K in business debts. Are these debts secured or unsecured? Are the debts yours personally or are they all owed to your business? How was your business incorporated?

You said you owe $250K in taxes as well. You need to keep in mind that even though some of your tax debt is more than three years old, you still may owe some or all of those taxes. Each year of your older-than-three-years taxes that can be discharged has to meet all five of these criteria:
1. The due date for filing a tax return is at least three years ago.
2. The tax return was filed at least two years ago.
3. The tax assessment is at least 240 days old.
4. The tax return was not fraudulent.
5. The taxpayer is not guilty of tax evasion.

Any older-than-three-years taxes that can't meet these five criteria can't be discharged in chapter 7 or 13 bankruptcy.

It's obvious you have a very complicated case with the IRS garnishment and high debt levels, so you need a really good bankruptcy lawyer and perhaps a tax lawyer as well to help you sort out your best options asap.

Start by setting up at least 3-4 free initial consultation appointments with very experienced bk attorneys in your area who frequently file business-related Ch 7 and Ch 13 cases. Explain the circumstances and ask for an emergency appointment because of the IRS garnishment. It may not be too late to work out a reasonable payment plan with the IRS either that's better than them taking 85% of your income now. At least either bankruptcy chapter may give you an option to start your climb out of the hole.

Start making those appointments with experienced bk attorneys asap!

[catleg]

You are correct, the means test only applies to consumer debts.
The debts associated with your business are non-consumer so for that portion you're in the clear doing chapter 7.
For the IRS, you'll hopefully get some other replies.
If you owe payroll tax for your ex-employees it gets ugly.
P.S. Yes the ch13 debt limits are more or less written in stone, they are black letter law but adjust every 3 years for "inflation" as defined by the government.

[despritfreya]

The current Ch 13 upper debt limits are $336,900 in unsecured debts or $1,010,650 in secured debts.

Chapter 13 debt limits increased last April. Rounded off, they are $1,080,000 secured and $360,000 unsecured.

OP is clearly over the unsecured limit but if OP's jurisdiction has determined that taxes are not consumer debt maybe more than 50% qualifies as “non-consumer” debt and therefore he can do a 7. Once discharged he can come back to file a 13 since he then would be below $360k, thus pay the non-discharged taxes over a 5 year span, if an offer/compromise or installment agreement cannot be reached with the taxing agency.

If the concept of the Chapter 20 (7+13) does not work, he can file a Chapter 11 from the start, but the non dischargeable taxes will run interest over the course of the case and, I believe, must be paid within 6 years of the petition date even if the Plan calls for payments over a longer period of time.

Des.

[catleg]

One benefit of the ch13 is that your tax debt is split into two parts, with the original taxes owed being priority debt, while the interest and penalties become part of the general unsecured pool which can be dsicharged.
So you have 2 choices, you can file ch 7 non consumer (possibly..how much is you car loan and mortgage?) and then do the ch13 but you wouldn't be eligible for a discharge for 8 years.
The alternative is to pay down your unsecured debt to 360k before filing ch13. This sounds like the better alternative. If you have a 401k or other retirement plan you can borrow from, that might be a way to swing it. The loan repayment reduces your plan payment in ch13.