588 B.R. 28
Bankr. W.D. Tenn.2018Background
- Terry L. L. Clothier and Barbara J. Clothier filed a joint no-asset Chapter 7 on September 4, 2013, and received general discharges on December 18, 2013; the case was later reopened to litigate dischargeability of 2008 and 2009 federal income tax debts.
- The IRS was listed as a prepetition creditor, received notice of the Chapter 7, but did not file a proof of claim (notice in no-asset Chapter 7 advised creditors not to file claims unless assets appear).
- Debtors had previously filed a Chapter 11 from January 19, 2012 to June 5, 2013; the Chapter 11 was dismissed before the Chapter 7 filing.
- Tax-return due dates (with extensions) were October 15, 2009 for tax year 2008 and October 15, 2010 for tax year 2009.
- The core legal question was whether each tax debt was nondischargeable under 11 U.S.C. § 523(a) / § 507(a)(8)(A)(i) based on whether the return was last due within three years before the Chapter 7 filing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IRS lost priority by not filing a proof of claim in a no‑asset Chapter 7 | Failure to file a proof of claim forfeits priority rights | No proof of claim is required in a no‑asset Chapter 7; IRS retained rights | Court: IRS did not lose priority by not filing a claim |
| Whether 2009 tax is dischargeable under § 507(a)(8)(A)(i) (3‑year lookback) | 2009 return was due Oct 15, 2010; filed Chapter 7 Sep 4, 2013 — within 3 years, so nondischargeable | Same: 2009 tax falls within three‑year period | Court: 2009 tax nondischargeable; judgment for IRS |
| Whether 2008 tax is dischargeable under § 507(a)(8)(A)(i) (3‑year lookback) | 2008 return was due Oct 15, 2009; filed Chapter 7 Sep 4, 2013 — more than 3 years, so dischargeable | IRS argued prior Chapter 11 tolled the three‑year period under Young v. United States | Court: § 507(a)(8)(A)(i) does not toll for prior bankruptcy; 2008 tax dischargeable; judgment for Debtors |
| Whether Young v. United States controls despite 2005 Code amendments | (implicit) Young tolled the lookback; therefore taxes could remain nondischargeable | Congress added a tolling provision for § 507(a)(8)(A)(ii) in 2005 but not for (i); legislative silence shows no toll for (i) | Court: Young effectively overruled by Congressional amendment; no tolling for (i) |
Key Cases Cited
- In re Simmons, 765 F.2d 547 (5th Cir. 1985) (no proof of claim required in no‑asset Chapter 7)
- Eide v. Colltech, Inc., 987 F. Supp. 2d 951 (D. Minn. 2013) (same principle on no‑asset cases and claims)
- In re Anderson, 72 B.R. 783 (Bankr. D. Minn. 1987) (same principle on claims in no‑asset Chapter 7)
- Young v. United States, 535 U.S. 43 (2002) (held prior bankruptcy tolled § 507 lookback—court finds Congress limited that holding by later amending the Code)