Houston, TX asked in Bankruptcy and Tax Law for Virginia

Q: i was recently (sept 2015) discharged from a chapter 13 bankruptcy, the irs was included in my payment plan i recently

received notice from irs that i owe additional money from 2004,06,07,08, and 09. my attorney says that they will not help because my case ended in September. i feel they should still represent me because those years were included in my chapter 13. am i wrong?

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1 Lawyer Answer
Russell J. Haynes
Russell J. Haynes
Answered
  • Tax Law Lawyer
  • Burke, VA
  • Licensed in Virginia

A: The IRS is often very bad about posting payments received during bankruptcy to the correct modules. A chapter 13 plan must pay all of the "priority" tax debts in full over the life of the plan. So the IRS should have applied the money they received from your plan payments to your priority tax debts. So the question is, which of your IRS debts were priority debts as of the date of your bankruptcy petition. The nonpriority debts should have been subject to the discharge upon completion of your plan payments. If the IRS is attempting to collect tax debts that were discharged, then they are in violation of the permanent injunction that arises upon entry of the discharge order and your bankruptcy attorney should be willing to help. The same is true if they screwed up posting the plan payments and are attempting to collect debts that were, in fact, paid during the bankruptcy. Often, the analysis of how tax debts should be classified and handled in bankruptcy is complicated and difficult to understand, by debtors, bankruptcy attorneys, and the IRS Insolvency Unit. However, it is possible, after the fact, to figure out where the payments should have been applied and get it corrected by working with IRS Insolvency. The bankruptcy attorneys can usually handle this. But if yours are unwilling to do so, then you may need to hire new bankruptcy counsel or specialized tax counsel to assist.

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