[CLBS] allocation of state tax receipts

[Randy French]

Did the State levy before the bk trustee paid out any funds?  If so, I can
see the State's point, to a point.  This is what I call an interesting
challenge, or, on a good day, some fun now.  If the entire priority claim of
the State for 2014 taxes was paid through the ch 7, I think the non-priority
portion of the claim would have been discharged.  If so, any effort to
collect would be a violation of the discharge injunction.  I do not think
the state is immune from the discharge injunction.  

The trick is to persuade the bankruptcy court that when the stay ended
because the discharge had been entered, whether any of the state' 2014 claim
was not discharged depends whether  the trustee had funds on hand to pay the
entire priority claim.  If payment of that priority claim  would mean that
the non-priority portion of the claim would be discharged,  then the levy
during the period between entry of the discharge and payment of the claim by
the estate was a violation of the discharge injunction.  Does that make some
level of sense?

This could be an interesting part of a discussion about taxes in bk at a
seminar coming to a location near all of you practitioners, if you live in
North Idaho where Savi is going to have the seminar in 2017.  Aaron,
litigate this well, get a very good conclusion and then you can decide
whether you write a newsletter article on it and present at the seminar.


Randy French


Law Office of Randal J. French, P.C.
Attorneys at Law
AP.O. Box 836 PBoise, ID 83701 B(208) 859-6881  

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-----Original Message-----
From: CLBS [mailto:clbs-bounces at admws.idaho.gov] On Behalf Of Aaron Tolson
Sent: Thursday, May 19, 2016 4:39 PM
To: clbs-bounces at admws.idaho.gov; clbs at admws.idaho.gov
Subject: [CLBS] allocation of state tax receipts

I have a chapter 7 client who owed 2014 state taxes when he filed.  The
bankruptcy estate generated funds to pay that claim, but the state levied
after the discharge and got 2,000, which they applied to 2014 and had a
small claim left in the case.  In the meantime debtors filed for 2015 and
owed 2,000.

It makes sense to me that the state could simply claim the 2014 tax through
the estate, apply the post-petition levy to 2015, that way the state gets
all their taxes and don't have to chase the debtor down for the money.  But
the state says they can't change the way the allocated the recovery funds.

Has anyone seen a bankruptcy court order the bankruptcy estate to pay the
full priority claim despite the post-petition collections at the request of
the debtor?
--
Aaron J. Tolson
2677 E. 17th St. #300
Ammon, ID. 83406
208-228-5221

This a privileged communication.  Please advise if you received it in error.
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