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Wallis v. I.R.S.; Case No. 14-1426 HRT; Order entered November 6, 2014 (11 U.S.C. § 1328(a); 26 U.S.C. § 7433; Rule 12(b)(6)).
The Debtor filed his chapter 13 case in 2008. He completed payments and received a discharge in 2013. He filed this adversary proceeding against the IRS seeking a declaration that his 2005 income tax liability was discharged. He also sought damages on account of IRS's alleged violations of the automatic stay and the discharge injunction. The IRS moved to dismiss under Rule 12(b)(6). The IRS claim originally included liability for 2005 and 2007 taxes in excess of $50,000.00. The Debtor's confirmed plan provided for full payment of the IRS claim. After the Debtor filed an amended 2005 tax return, he objected to the IRS claim. The objection stated that the Debtor had filed an amended tax return and invited the IRS to amend its claim to reflect the correct amount of the 2005 income tax liability. The IRS did not respond and the claim objection was granted, disallowing the IRS claim. IRS subsequently amended its claim but the amended claim only reflected the 2007 tax liability and not the 2005 tax debt. The debtor modified his plan to pay the amended IRS claim in full â€“ approximately $23,000.00. Later the IRS filed its final amended claim that reduced the 2007 liability claim to approximately $13,000.00 but still failed to show the 2005 debt. The IRS's amended claim was paid in full but the Debtor made no provision in his plan for payment of the 2005 tax debt. The Court dismissed the claims for violation of the automatic stay and discharge injunction. The count for violation of the stay was deficient because factual allegations did not meet the requirements of notice pleading under Rule 8. The Court dismissed the count alleging violation of the discharge injunction because the exclusive remedy against the IRS for willful violation of the discharge injunction is a damages claim under 26 U.S.C. § 7433(e) and the Debtor failed to allege exhaustion of administrative remedies which is a necessary requirement for recovery of damages. The Court allowed the case to go forward with respect to the declaratory judgment count. As a general matter, § 1328(a) operates to discharge any debt that is either provided for under the plan or disallowed under § 502. The debt for 2005 income tax liability was not provided for under the plan but the complaint alleges that the IRS claim was disallowed. That allegation was sufficient to defeat the IRS Rule 12(b)(6) motion with respect to that count. The ultimate issue in the case will likely focus on whether granting a claim objection by default that does not allege a substantive § 502(b) ground for disallowance is a disallowance under § 502 as required for discharge under § 1328(a).
Posted: 12/24/2014 3:42:01 PM
In re: Michael J. Mikelson, Bankruptcy Case No. 13-21830ABC.
A Chapter 13 debtor presented a plan which proposed to preclude his student loan creditor from receiving any distribution under the plan while debtor's other unsecured creditors would be paid 100% of their claims. The debtor's liquidation analysis demonstrated that the student loan creditors, along with other unsecured creditors would be paid a significant percentage of their claims if the case was liquidated under Chapter 7. The Court denied confirmation of debtor's plan unless debtor obtained and filed the express written consent of the student loan creditor to such treatment proposed under the plan.
Posted: 10/3/2014 7:14:14 AM
In re: Stanley Robert Ostrander and Nancy Ostrander, Bankruptcy Case No. 14-17534ABC.
Chapter 7 debtors claimed an exemption under C.R.S. §13-54-102(1)(n) in the proceeds of a claim for a personal injury action. The Chapter 7 Trustee objected to debtors' claim of exemption to the extent any award in that action would be attributable to medical or collection costs incurred in connection with the personal injury. The Court overruled the Trustee's objection holding that the exception for medical and collection costs of C.R.S. §13-54-102(1)(n) does not reduce the debtors' exemption vis a vis the Trustee or property of the bankruptcy estate.
Posted: 10/3/2014 7:11:56 AM
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