Bankruptcy Taxation

Presented by the Bankruptcy Taxation and Labor & Employment Committees

Presented by the Mediation and Secured Credit Committees

Payment of property taxes remains a recurring problem for many homeowners. Frequently, they do not understand what taxes are required to be paid, what interest rates are being charged, and what the consequences of nonpayment are. What is the process for property tax foreclosure? How long is the redemption period? Is there a point when a chapter 13 case can no longer be effective in dealing with property taxes? What if the taxing authority enters into repayment plans during or after the redemption period? What is the effect of these plans when an individual files for bankruptcy in the midst of a repayment program? What property interest, if any, does the debtor retain after foreclosure, or after redemption? How does a debtor address delinquent property taxes in his or her schedules?

When is a tax return not a tax return? Bankruptcy can be very useful when seeking to discharge personal income tax obligations, but if the return has not been filed on time, dischargeability may be in jeopardy. Many courts have addressed this issue and have issued widely divergent views, including the First Circuit’s strict interpretation of what constitutes a tax return as announced by the majority in In re Fahey. This panel will focus on the development of the case law in the First Circuit, the information you must obtain from the taxing authority to determine when a tax return has been filed, what constitutes a return, and strategies to employ in the event that the tax return your client filed is defective and the taxes reported on that return are nondischargeable.

The impact of a bankruptcy filing on a consumer debtor’s tax liabilities requires a reconciling of hazy IRC provisions with Title 11. Topics will include the impact on the debtor’s discharge for late-filed income tax returns, 1099s ((A) and (C)), 26 U.S.C. § 108, tax liens and their treatment under the Code (§ 724), and the pros and cons of filing a “stub” year tax return.

Hospitality and the Tax Man: Historical Hospitality Tax Issues in Distress

This panel provides updates on the law and suggests the necessary tools for your consumer tax toolbox, in particular concepts of cancellation of indebtness, home mortgage modiifcations, issuance of 1099s by creditors, separate-entity treatment under IRC section 1398, priority of tax claims, nondischargeability of tax claims, and other thorny tax issues frequently facing consumer bankruptcy lawyers.

This panel will focus on recent trends in student loan dischargeability cases, including whether the Brunner standard should be revisited, and recent case law involving tax debts.