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I'm in the process of filing all past due tax returns and filing chapter 13 bankruptcy. Will interest/penalties have to be paid?

Woodstock, GA |
Filed under: Chapter 13 bankruptcy

I'm in the process of filing all past due tax returns for both State of Ga & IRS. I'm considering filing chapter 13 bankruptcy. However, because my tax returns have just been filed they don't fall within the 3 year, 2 year or 240 window. Question one would be do I need to wait until all my tax returns have been processed and assessed to file bankruptcy?

When factoring in my disposable income by taking into account IRS standards of living and then comparing it to what I could pay into the plan over 60 months, I wouldn't have paid enough to cover all my priority tax debt & secured debt (car). Are the interest and penalties to date considered unsecured such as a credit card or will they have to be paid in full through the plan?

Attorney Answers 5

  1. Interest and penalties on priority debt are also priority debt; but no more interest or penalties will accrue once your case is filed. You don't have to have them all filed before filing, but they'll need to be filed before your Plan can be confirmed.

  2. Interest and penalties that have accrued to date on priority taxes will be priority claims and you're going to need to pay them in your plan.

    Sit down with a lawyer and see if a workable plan is possible. If it is, you probably can file now, although the IRS not having processed the returns yet will create a few possible bumps, especially if they disagree with what you file, or if you have underestimated accrued interest and penalties.

    If you find this answer helpful, please mark it here on AVVO as helpful. In answering you, I am attempting to communicate general legal information and am not representing you (and am not your lawyer). Do feel free to call me at 404-768-3509 if you wish to discuss actual representation (the phone call also does not retain counsel; that requires an office visit and appropriate paperwork). In that a forum such as this provides me with limited details and doesn't allow me to review details and documents, it is possible that answers here, while meant to be helpful, may in some cases not be complete or accurate, and I highly recommend that you retain legal counsel rather than rely on the answers here. (You can also email my office at . An email also does not retain my office, but can help you get an appointment set if you prefer not to call). I am happy to discuss possible representation with you. Any information in this communication is for discussion purposes only, and is not offered as legal advice. There is no right to rely on the information contained in this communication and no attorney-client relationship is formed. Nothing in my answer should be considered as tax-advice. To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein. I am also required to advise you, if your question concerns bankruptcy, that the U.S. Congress has designated Ashman Law Office as a debt relief agency that can help people file bankruptcy.

  3. While the interest and fees are priority debt that will need to be paid back in the bankruptcy, once you file the bankruptcy neither interest nor fees will continue to accrue. You do not have to wait until the returns are processed (or even filed) to file the bankruptcy, however it is good process to at least have them filed prior to filing the bankruptcy. In the Northern District of Georgia, your Chapter 13 plan will not be confirmed until you file/process all tax returns. If a Chapter 13 will work for you, it's a good way to manage the tax debt you owe and pay it back over a 5-year period. I am happy to take a look at your situation to see whether it will work for you, just give a call. 770-393-4985.

  4. It is a good idea to get these filed prior to filing, as the IRS will estimate them with no deductions and file a large claim based on the estimate if you don't, causing a problem with the case. However, there may be options you can explore with an experienced bankruptcy attorney once you know the amounts. Interest and penalties are normally considered priority debt, but if there are some older years mixed in, you may have some claimed as unsecured, or even others that are unsecured but non-dischargeable. One other thing to consider is that the priority portion of the tax debt will be deducted from your disposable income, so the numbers may come out better than you are currently calculating.

    The above information is general in nature. In order to obtain more specific and legal advice upon which to base your important decisions, please contact our office directly for a free phone or in person consultation. Robert M. Gardner, Jr. Hicks, Massey & Gardner, LLP 53 W. Candler St. Or 718 Oak St. Winder, Ga. 30680 Gainesville, Georgia (770) 307-4899 (770) 538-0555 serving metro Atlanta and all of Northeast Georgia Bankruptcy, Divorce, Personal Injury, Worker’s Compensation, Medical Malpractice, Adoption, Civil and Criminal Litigation

  5. Please please do yourself a favor and consult with a bankrputcy lawyer to review your situation. If chapter 13 is the answer let them handle it. Success rates in chapter 13s for self represented debtors are less than 3%.

    I am not YOUR lawyer. Don't rely on answers to questions as legal advice. For legal advice contact a Bankruptcy Attorney for a consultation. Tokarska Law Center is a Federal Debt Relief Agency representing individuals and businesses in filing for bankrutpcy protection under the U.S. Bankrutpcy Code. Kathryn U. Tokarska is a San Diego Bankruptcy Attorney, owner of Tokarska Law Center, 185 West F Street #100, San Diego, CA 92101, (619) 285-1992

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