In a chapter 13 case with priority tax claims, the debtor must pay these claims in full if the chapter 13 plan is to be confirmed. When the priority tax claim arises under § 507(a)(8)(C), such tax claims are an exception to the discharge under the general rule of § 1328.
Commonly, a debtor’s priority tax claims are the unpaid income taxes due for recent tax years. To be confirmable, the chapter 13 plan would have to pay those claims in full over the life of the plan.
Section 1328(a)(2), governs the discharge of a chapter 13 debtor. Upon completion of all payments under the plan and the issuance of a discharge, the entire priority tax claim is discharged, because such debt was paid through the chapter 13 plan. Thus, successful completion of a chapter 13 plan allows for the discharge of priority tax debts that are generally nondischargeable.
The priority tax debt is specifically excepted from discharge under § 1328(a)(2), the debtor remains liable for any unpaid portion of the claim, including any interest that accrues on the claim post-petition. In cases where the debtor is not eligible for a discharge, or where the case is dismissed prior to the completion of the plan payments and the issuance of a discharge, the debtor remains liable for the unpaid portion of the priority taxes and any interest that accrued post-petition as well.
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The Chapter 13 bankruptcy allows the debtor the ability to enjoy the protection of the automatic stay and pay the debts over time. Priority tax debt is an exception to discharge but the plan payments provide for the payment of the priority tax debt through the plan. Contact the attorneys at Kain and Scott and see us at www.kainscott.com. You will glad you did!
