Back Taxes Meet a Chapter 13 Plan

By admin • June 7th, 2010

In the context of a Chapter 13 bankruptcy, if the State or IRS voluntarily submits a proof of claim for tax liability to the court, the claim will become part of your bankruptcy.  If your bankruptcy is paying a percentage to unsecured creditors (like credit cards), then it would be beneficial to pay the claim through your bankruptcy plan as it would not increase your overall Chapter 13 plan payment amount.  A portion of each payment is directed towards the taxes and by the end of the plan the taxes are paid in full.

It is unclear that when applying for payment arrangement with the State and/or IRS whether they will choose to set up a separate repayment plan or submit a bankruptcy proof of claim.  Most likely they will default towards setting up a separate repayment plan.

As always, please check with your attorney and let them know what kind of payment arrangement the IRS and State is proposing before making any payments.  We will explore your option of claiming the current tax liability in your existing Chapter 13 bankruptcy plan once we know the IRS and/or State’s course of action.


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