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In re Workman

United States District Court, M.D. Pennsylvania
Mar 30, 2004
No. 3:03cv1229 (M.D. Pa. Mar. 30, 2004)

Opinion

No. 3:03cv1229.

March 30, 2004


MEMORANDUM


Before the court for disposition is the appeal of the Defendant United States of America, Internal Revenue Service, (hereinafter "IRS") of an order issued on June 13, 2003, by Bankruptcy Judge John J. Thomas. The plaintiff in the instant case is John Workman. The Bankruptcy Court held that the tax claims for the years 1981, 1984, and 1986 through 1990 are dischargeable and that any tax liens held by the IRS would pass through the bankruptcy estate untouched. On June 25, 2003, the IRS appealed the order. The matter has been briefed, rendering it ripe for disposition. Background

The background facts are derived from the stipulation of facts entered into by the parties. See Exhibit 6 of the Record on Appeal.

On November 7, 1995, Plaintiff/Appellee John Workman filed a petition under Chapter 13 of the Bankruptcy Code as well as a Chapter 13 Plan. In pertinent part, Debtor's Chapter 13 Plan, under the paragraph entitled "Priority Claims," provides as follows:

In accordance with Section 507(a)(7)(A)(i) the tax obligation of the Debtor John Workman to the Internal Revenue Service for tax years 1982, 1984, 1985, 1987, 1988, 1989 and 1990 totally approximate (sic) $42,200 are not entitled to priority and are treated as such in this plan.

Chapter 13 Plan, Ex. 1, to the Stipulation of Facts (hereinafter "Chapter 13 Plan") at ¶ 3.

In addition, the plan provides, " SECURED CLAIMS. Regular Monthly Payments: The Debtor has no regular monthly payment to any creditor" Chapter 13 Plan at ¶ 5.

On July 23, 1996, the court entered an order confirming the plan. See Exhibit 2 to the Stipulation of Facts.

Plaintiff instituted the instant adversary proceeding in January 1996 to determine the dischargeability for unpaid income tax liabilities from 1982, 1984 and 1986-1990. See Exhibit 4 to the Stipulation of Facts. The IRS filed a "proof of claim" on April 11, 1996 for unpaid income taxes for the years 1982, 1984, 1986, 1987, 1988, 1989, and 1990. The total amount of the proof of claim is $36,742.29. See Exhibit 3 to the Stipulation of Facts. In its answer to the instant adversary proceeding, the IRS admitted that to the extent that its claim was not secured, it "would be determined to be an unsecured general claim under 11 U.S.C. § 506(a), and would be dischargeable." See Exhibit 5 to the Stipulation of Facts. In June of 1996, the Bankruptcy Court entered a stipulated order that discharged the tax liabilities for the years 1987, 1988 and 1989. Remaining at issue are the income tax liabilities for 1982, 1984 and 1986. The parties agree to treat the obligations for 1990 in the same manner as the 1982, 1984 and 1986 tax years are treated.

The plaintiff has completed all the payments required by his Chapter 13 plan and has received a Chapter 13 discharge. See Exhibit 6 to the Stipulation of Facts. At the date of the petition, plaintiff owned personal property valued at $7,150.00. The plaintiff's complaint did not request any relief regarding any purported security interest of the IRS.

After the parties filed the joint stipulation of facts, the IRS moved for summary judgment. The bankruptcy court heard argument on the summary judgment motion. The court found the tax claims for the years at issue to be dischargeable and held that any tax liens held by the IRS would pass through the bankruptcy estate untouched.

Jurisdiction

We have jurisdiction over the instant bankruptcy appeal pursuant to 28 U.S.C. § 158(a)(1), which provides that the district courts of the United States have jurisdiction to hear appeals from final judgments, orders, and decrees of the bankruptcy courts.

Standard of Review

This court reviews the bankruptcy court's conclusions of law de novo. In re O'Brien Environmental Energy, Inc., 188 F.3d 116, 122 (3d Cir. 1999). The bankruptcy court's findings of fact will only be set aside if clearly erroneous. Bank. Rule 8013 ("On appeal the district court . . . may affirm, modify, or reverse a bankruptcy judge's judgment order, or decree or remand with instructions for further proceedings. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses."); In re O'Brien, 188 F.3d at 122.

Discussion

The IRS's argument is that the secured interest portions of the tax liabilities for the years in question are not "provided for" in plaintiff's Chapter 13 Plan. Because they are not provided for, these tax liabilities were not discharged. The debtor argues that the bankruptcy court did not err in finding that the tax liabilities were discharged.

The law provides that "[a]s soon as practicable after completion by the debtor of all payments under the plan . . ., the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title . . ." 11 U.S.C. § 1328(a).

Therefore, the issue we must decide is whether the tax liabilities at issue are "provided for" in the plan.

The Bankruptcy Code does not define the term "provided for." Courts have held that a plan must at least acknowledge the debt for it to be discharged even if the plan does not propose to make any payments on the claim. In re Hairopoulos, 118 F.3d 1240, 1243 (8th Cir. 1997); see also In re Gregory, 705 F.2d 1118, 1122 (9th Cir. 1983). The IRS's position is that while the Plan acknowledges the tax liabilities, it only partially provides for them. According to the IRS, the Plan is silent as to the secured portion of the claim, and the secured portion should not be discharged.

After a careful review, we are in agreement with the bankruptcy court. The tax liabilities at issue are listed in the Chapter 13 Plan under "Priority Claims." The Plan states that they total approximately $42,200.00 and are not entitled to priority and are treated as such in the plan. Chapter 13 Plan, at ¶ 3. The next two paragraphs of the Plan deal with secured claims. The Plan indicates that the debtor has no regular monthly payments to any creditor. Chapter 13 Plan, at ¶ 5. The plan further indicates that no amount will be paid through the plan to secured creditors. Chapter 13 Plan, at ¶ 4. Unsecured claims are mentioned in paragraph 6, which reads: "The debtor shall make payments in the amount of Four Thousand Seven Hundred and Forty ($4,740.00) Dollars to holders of unsecured, non-priority claims." Para. 6.

Although, perhaps not a model of clarity, the Plan clearly mentions the debts at issue and then provides for secured claims and unsecured claims. We find that the cases cited by the IRS do not provide support for its position. None of them deal with the issue which with we are presented, that is whether a Chapter 13 Plan "provides for" the secured portion of a tax liability where the plan specifically mentions the tax liabilities at issue and then provides for secured and unsecured claims. Therefore, we reject the IRS's argument that the Plan did not provide for the tax liabilities in question, and its appeal will be denied.

The plaintiff notes that there is nothing in the record to indicate that any of the IRS's claims have been bifurcated into secured and unsecured portions. A review of the record reveals that the plaintiff is correct.

The bankruptcy court's decision that the IRS's tax liens would pass through the bankruptcy untouched, appears not to be in dispute. Therefore, that conclusion will also be upheld.

In addition to the bankruptcy appeal, before the court is a motion by plaintiff's counsel withdraw from the case. The motion will be denied.

An appropriate order follows.

ORDER

AND NOW, to wit, this 30th day of March 2004, the bankruptcy appeal of the United States of America, Internal Revenue Service, is hereby DENIED. The plaintiff's counsel motion to withdraw is DENIED. The Clerk of Court is requested to close this case.


Summaries of

In re Workman

United States District Court, M.D. Pennsylvania
Mar 30, 2004
No. 3:03cv1229 (M.D. Pa. Mar. 30, 2004)
Case details for

In re Workman

Case Details

Full title:In Re: JOHN WORKMAN, Debtor. JOHN WORKMAN, Plaintiff v. UNITED STATES OF…

Court:United States District Court, M.D. Pennsylvania

Date published: Mar 30, 2004

Citations

No. 3:03cv1229 (M.D. Pa. Mar. 30, 2004)

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