459 B.R. 376
Bankr. W.D. Wis.2011Background
- Debtors Duane J. Kolve and Angela S. Kolve filed Chapter 7 bankruptcy on November 12, 2010;
- They had a prior Chapter 13 case filed October 2005, with a plan confirmed February 2006 and dismissal October 2007;
- Debt owed includes 2005, 2006, 2007 individual income taxes and trust fund taxes;
- Trust fund taxes and 2007 taxes are nondischargeable;
- Debtors seek discharge of 2005 and 2006 taxes (about $61,000) under 11 U.S.C. §523(a)(1) and §507(a)(8) three-year lookback;
- IRS argues tolling of lookback period due to prior Chapter 13 and extensions, potentially precluding discharge
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §507(a)(8) tolling extends the lookback period | Kolves contend tolling only where the stay actually blocked collection | IRS argues tolling applies if stay or preclusion existed, regardless of actual disability | No; tolling requires actual effect on collection defense in prior case |
| Whether the prior Chapter 13 precluded IRS collection | Kolves assert revesting after plan confirmation ended stay restrictions | IRS contends tolling applies due to stay or preclusion by confirmed plan | No; revesting after confirmation means no automatic stay preclusion to tolling |
| Interpretation of 'stay of proceedings' and 'collection was precluded' in § 507(a)(8) | Kolves read tolling narrowly to actual stay precluding collection | IRS urges broad reading allowing tolling even without actual disability | Narrow interpretation favored; tolling requires actual government disability or preclusion |
| Effect of §1327(b) revesting on tolling and lookback | Post-confirmation assets revest; stay not applicable to pre-confirmation taxes | Revested assets could still permit tolling if stay affected collection | Tolling not triggered; lookback not extended by revesting |
| Overall disposition of dischargeability for 2005 and 2006 taxes | Lookback not tolled; taxes dischargeable | Lookback tolled, nondischargeable tax claims | Plaintiffs granted discharge of 2005 and 2006 taxes |
Key Cases Cited
- Young v. United States, 535 U.S. 43 (Supreme Court 2002) (lookback tolling under Young for pre-petition stay)
- Midlantic National Bank v. New Jersey Dept. of Environmental Protection, 474 U.S. 494 (Supreme Court 1986) (automatic stay purpose and centralization of disputes)
- Irwin v. Department of Veterans Affairs, 498 U.S. 89 (Supreme Court 1990) (equitable tolling principles for limitations periods)
- In re Heath, 115 F.3d 521 (7th Cir. 1997) (estate control after plan confirmation; interpretation of 1306/1327 interplay)
- In re Wetzel, 381 B.R. 247 (Bankr.E.D. Wis. 2008) (interpretations of interplay between §1306(a) and §1327(b))
- In re Murphy, 474 F.3d 143 (4th Cir. 2007) (multiple interpretations of 1306(a) and 1327(b) interaction)
- Hearth Admins., Corp v. City of New York, 394 F.3d 382 (2d Cir. 2012) (briefs discussing public policy arguments in motions)