[CLBS] Question on Effect of Conversion

[Wade Carolyn G]

The facts aren't clear.

When was the first case filed, and under what chapter?  How long did it stay in that chapter?  What happened then?  When was the second case filed, and under what chapter?

When was the tax incurred?  


Carolyn Wade
Oregon Department of Justice
541.686.7846 (Eugene)
503.934.4459 (Salem)

-----Original Message-----
From: CLBS [mailto:clbs-bounces at admws.idaho.gov] On Behalf Of Randal French
Sent: Thursday, February 21, 2019 6:37 PM
To: clbs at admws.idaho.gov; Amber Kauffman
Subject: Re: [CLBS] Question on Effect of Conversion

If the first case was the ch 13 converted to chapter 7 and the tax debt arose during the ch 13 more than a decade ago, then for income taxes it would seem that it is no longer a priority tax claim if the tax returns were filed.  If it is any other kind of tax, then it would still be a priority tax.

Whether it is discharged depends on the language of 523(a), doesn't it?  I don't have 523(a) in front of me.  Doesn't that make non-dischargeable the taxes owed for which no tax return was filed, a tax return was fraudulent, the tax is a priority tax under 507(a)(8), or the tax return was filed within two years of the current bk filing date? Review that section for accurate information.

If it is dischargeable, then any action to try to collect violates the stay.  If the debt is not dischargeable, then the stay of action against the debtor ends when the discharge is granted or denied.  Once that happens, if the debt is in fact not discharged, then the state can commence collection action against the debtor from assets that are not assets of the estate, such as post-petition income.

But even if the debt would not be discharged, if it ultimately would be paid in full from the estate by a distribution from the ch 7 trustee, I think any collection action would violate the stay and expose the State to
potential sanctions for a stay violation.

Good luck.

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________________________________
From: CLBS <clbs-bounces at admws.idaho.gov> on behalf of Amber Kauffman <Amber.Kauffman at tax.idaho.gov>
Sent: Thursday, February 14, 2019 4:13:31 PM
To: CLBS at admws.idaho.gov
Subject: [CLBS] Question on Effect of Conversion

A debt that arises after the date of petition but before the date of conversion from 13 to 7 is treated as if it were prepetition and could be discharged by the chapter 7 if otherwise dischargeable.  However, since the date of filing and commencement of the case otherwise does not change upon conversion, does that means a creditor with a post-petition, pre-conversion, debt is not stayed from collecting that debt by the automatic stay?

The reason I am asking is in regards to this section of 507(a)(8)(A):
(ii)assessed within 240 days before the date of the filing of the petition, exclusive of-
                ***
(II)  any time during which a stay of proceedings against collections was in effect in a prior case under this title during that 240-day period, plus 90 days;

I'm dealing with a case that was in Chapter 7 for 13 years, followed immediately by another Chapter 7, and am trying to determine if the post-petition pre-conversion tax debt was discharged by the second Chapter 7.

Thanks in advance!

Amber

Amber Kauffman
Deputy Attorney General
Idaho Office of the Attorney General
Contracts and Administrative Law Division * Idaho State Tax Commission
Phone: (208) 334-7542  * Fax: (208) 334-7844
amber.kauffman at tax.idaho.gov<mailto:amber.kauffman at tax.idaho.gov>

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