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Tax Debt in Chapter 13

Taxes in 13

Priority taxes must be paid in your Chapter 13 plan. Priority taxes are taxes which can’t be discharged in Chapter 7.

The priority amount includes interest to the date of filing on the tax; but penalties with a priority tax are unsecured debt.

There is an exception for tax years more than three years old for which a return has not been on file for two years: those taxes are neither discharged nor paid as priority, unless they were assessed within 240 days of the filing.

Tax liens Liens in Chapter 13: If the lien exceeds the value of the assets available to secure the tax, the portion of the tax exceeding the value of the assets is treated as either a priority claim, if recent, or an unsecured claim, if older.

The result is that tax liens that have grown huge over years can be stripped down to the actual value of current assets, locked in as to value as of the commencement of the case, and paid over 3-5 years through the Chapter 13 plan.

 

 

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