Tag: taxes

Bankr. E.D.N.C.: In re Mead- Validity of Pre-Petition Offer in Compromise of IRS Claim


Prior to filing Chapter 13, the Debtors entered into an Offer in Compromise (“OIC”) with the IRS, agreeing to make four installment payments of $1,000.00 each. After making the first due payment, the Debtors filed bankruptcy four months later and the IRS filed a secured claim for $21,033.15 and an unsecured claim for $83,289.35. The Debtors objected asserting that the IRS should remain bound by the terms of the OIC pursuant to the anti-discrimination provisions of 11 U.S.C. § 525(a). The IRS countered asserting that the terms of the OIC specifically provided that if the Debtors filed bankruptcy “before the terms are fully met, any claim the IRS files in the bankruptcy proceedings will be a tax claim”, interpreting the term “tax claim” to mean the full amount owed prior to the OIC.… Read More

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Bankr. E.D.N.C.: In re Marshall (Deceased)- Hardship Discharge, Death and Taxes


The Debtor died during her Chapter 13 case, still owing more that $165,000 in nondischargeable taxes to the IRS. Following the severance of her co-debtor/husband’s case, the Debtor’s attorney then filed a Motion for a Hardship Discharge pursuant to 11 U.S.C. § 1328(b). While stating that the death of a debtor can constitute a circumstance precluding completion of plan payments for which a debtor should not be held accountable. See In re Bond, 36 B.R. 49 (Bankr. E.D.N.C. 1984), the bankruptcy court here held that the evidence indicated the Debtor “deliberately avoided paying taxes on her income prior to filing the petition, an act of bad faith, which in the Court’s discretion, is undeserving of a hardship discharge.”

For a copy of the opinion, please see:

Marshall (Deceased)- Hardship Discharge, Death and Taxes.pdf Read More

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Bankr. M.D.N.C.: In re DeCoro USA, Limited- Tax Liability Between Subsidiary and Foreign Corporate Parent


The Debtor was a North Carolina corporation, wholly owned by DeCoro Limited (“Ltd.”), a Hong Kong limited liability company, which shipped furniture manufactured in China to the United States. The the furniture sales in the United States were procured by the Debtor. In 2008 or 2009, the IRS began an examination to determine whether the Debtor or Ltd. were liable for taxes in the United States. The determination hinged on whether the Debtor was a “dependent agent” of Ltd., in which case Ltd. would be liable for the taxes, or if the Debtor was an “independent distributor”, in which case the Debtor would be liable for the taxes.… Read More

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Bankr. M.D.N.C.: In re Cooper- Debtor must Exhaust Administrative Remedies with the IRS Prior Receiving Damages for a Violation of the Automatic Stay


The Debtor brought a motion for sanctions for violation of the automatic stay under 11 U.S.C. § 362 against the IRS for continuing to garnish wages after repeated notice of the bankruptcy. The IRS responded and the bankruptcy court agreed  that the Debtor had failed to exhaust his administrative remedies with the IRS and that 26 U.S.C. § 7433(d) (1) provides that “[a] judgment for damages shall not be awarded under subsection (b) unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service.”


The attached two memos from the IRS explain that the Debtor must,  pursuant to Treas.… Read More

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