Chapter 13 Priority Taxes

[conative]

We filed a Chapter 13 in 10/2009. Our payments were increasing significantly every year to the point that we could not make the payments and had to let it get dismissed in 03/2012. In 06/2012, we filed a new case. My question is regarding our priority taxes. The new case shows that we have to pay priority back taxes back through 2006. According to Nolo.com, priority taxes would only go back 3 years. If this is correct, why does the new plan list our priority taxes back to 2006. We did not do a continuation of our previous plan. We actually filed a new case with a new case number and new everything.

If our priority taxes due were actually the last 3 years (2011, 2010, 2009), we would only owe about $19000 in priority tax. Since the plan shows the priority taxes going back to 2006 (2006, 2007, 2008, 2009, 2010, 2011), it shows that we owe $101,000. There is definitely a significant difference between $18000 and $101,000.

So which is correct, would we have priority tax back through 2006 or should it only be back through 2009? We are concerned our current attorney is not giving us the best advice.

[justbroke]

If your attorney is telling you that your taxes are still not dischargeable, then they are not dischargeable. You could seek to file a Complaint to Determine Dischargeability in the bankruptcy case, but that would cost you extra with the attorney. Please understand that the BAPCPA changes in 2005 allows the "dischargeability" period for taxes to be tolled when there is a pending bankruptcy. In other words, because your taxes, from 2006, were tolled during your bankruptcy, which was dismissed 3/2012, the period of time for discharged was tolled.

So, if you filed 10/2009, then the 2006 taxes were not dischargeable (because they were not "due without penalty" until 4/2007 making them subject to discharge after 4/2010). Because you filed Bankruptcy -- a Chapter 13 -- the period was then "tolled" from 10/2009 through 3/2012 when you had your case dismissed. This means that the clock started again. So, have your attorney explain it. They'll probably reference 11 USC 507.

Your attorney will look to caselaw from Colorado, but this has pretty much been "codified" by the changes to the Bankruptcy code back in 2005. If you are concerned about the attorney, perhaps you could speak with another attorney, but my read is that the taxes were "tolled" and you will not be able to discharge them for 3 years and 90 days from 3/2012.

11 USC 507 (8)... An otherwise applicable time period specified in this paragraph shall be suspended for any period during which a governmental unit is prohibited under applicable nonbankruptcy law from collecting a tax as a result of a request by the debtor for a hearing and an appeal of any collection action taken or proposed against the debtor, plus 90 days; plus any time during which the stay of proceedings was in effect in a prior case under this title or during which collection was precluded by the existence of 1 or more confirmed plans under this title, plus 90 days.

[HHM]

The only way to know, is to pull the transcripts and your prior BK filing and run the numbers.

But as JB points out, and based on the information you provided, your attorney sounds correct in that the taxes are not dischargeable because of the prior BK filing.

If you want a second opinion, I refer people to www.bankruptcytaxdischarge.com But it is not a free service.

[justbroke]

I actually had this same issue when I was converting from Chapter 13 to Chapter 7. There was already caselaw from the 11th Circuit from 1999 which basically used the court's equitable powers to "toll" the time period. However, the BAPCPA changes to the tax code actually codified this into law. Either way, I wanted to discharge my 2005 tax assessment, but it was not going to happen. (It was a very small amount anyhow, but it would have been nice.)