In re Goodwin
| Decision Date | 20 February 1986 |
| Docket Number | Bankruptcy No. 282-00246. |
| Citation | 58 BR 75 |
| Parties | In re Clifford J. GOODWIN, Barbara J. Goodwin, DBA Goodwin's Discount Furniture and Appliance Center, Debtors. |
| Court | U.S. Bankruptcy Court — District of Maine |
Matthew Caras, Verrill & Dana, Portland, Me., for debtors.
Christopher Kliefoth, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., for IRS.
This proceeding raises squarely the issue of the effect of a tardy filing of a proof of claim by the Internal Revenue Service in a chapter 13 case. Upon the stipulated facts, the court concludes that the claim must be disallowed and upon successful completion of the debtors' confirmed plan the claim will be discharged.
The debtors filed their chapter 13 petition on June 18, 1982 and the section 341 meeting of creditors was scheduled for July 23, 1982. Notice of the meeting was mailed on June 25, 1982, to all creditors, including the IRS.1 The notice of the meeting included a notice that proofs of claim must be filed within 6 months from the date set for the meeting of creditors or they would not be allowed. Thus, the last date for filing a proof of claim was January 23, 1983.2
On June 25, 1984, IRS filed a proof of claim in the amount of $7,618.82. The claim represented a 100% penalty provided for by 26 U.S.C. § 6672, imposed upon the debtors as "responsible persons" for failure to collect and pay over employment taxes assessed against Goodwin's Discount Furniture, a Maine corporation of which the debtors were officers, for the period from June 1980 to September 1981.
On June 8, 1984 the debtors' chapter 13 plan was filed. It was objected to by IRS on July 10, 1984.
On October 10, 1984 a modified plan was filed by the debtors, which was confirmed, after hearing, on October 12, 1984. The plan provides:
Any and all claims of, and liabilities of the Debtors to, the IRS for taxes of any kind for the years 1975 through 1982 and any past, present and future interest and penalties regarding said taxes of any kind for the years 1975 through 1982 (the `Federal Tax Claims\') shall be satisfied in full and discharged upon the payment by the Debtors to the IRS of the full face amount of their duly filed, proved and allowed claims. . . .
On May 30, 1985 a joint objection was filed to the IRS claim by the standing chapter 13 trustee and the debtors on the ground that the claim was untimely filed. A response to the objection was filed by IRS on June 24, 1985. Pretrial conferences were held on the objection on June 25 and July 30, 1985. A pretrial order was entered on August 2, 1985 establishing a briefing schedule.
On August 30, 1985, the IRS filed a motion for leave to withdraw its proof of claim on the ground that the "proof of claim filed June 19, 1984, in the amount of $7,618.82, was filed after the last day for filing such proofs of claim. . . ." On September 4, 1985, the debtors objected to IRS's motion for leave to withdraw its claim. A hearing in chambers was held on the IRS's motion and debtors' objection on September 26, 1985. During that hearing, another briefing schedule was established.
This proceeding demonstrates the advantages afforded chapter 13 debtors by the Bankruptcy Reform Act of 1978. (The Code). It also dramatizes the requirement of diligence on the part of creditors.
To encourage debtors to use chapter 13 and thus provide some payment to creditors, Congress affords chapter 13 debtors a much broader discharge than is available under other chapters of the Code.
Under Section 1328(a), which applies only to chapter 13 debtors who complete their plan, only two types of debts are excepted from discharge. Section 1328(a) provides:
Taxes are not excepted from discharge under section 1328(a) as contrasted with section 523(a)(1), which does so except them. Section 523(a), by its terms, does not apply to discharge under section 1328(a).3
In order to be discharged under section 1328(a), however, a debt must be "provided for by the plan or disallowed under section 502" of the Code. The IRS contends that its claim is not provided for by the debtors' plan. At first blush the IRS's contention seems to have merit. Under the unusual circumstances of this case, the debtors' modified plan was not filed and confirmed until after it was obvious that the IRS claim was not timely filed. As a result, the IRS argues, the claim could not be "duly filed, proved and allowed" as provided for by the plan.
Upon reflection, the court concludes that the IRS's contention is untenable. In the first place, the objectionable language "duly filed, proved and allowed" is surplusage, because the Code and Rules require claims to be duly filed and allowed in order to be paid under a chapter 13 plan. The IRS has cited no authority, and the court can find none, that supports its position. See In re Whitten, 49 B.R. 220 (Bkcy.N.D. Ala.1985). In addition, the IRS's contention was not raised at the hearing on confirmation of the debtors' plan by counsel for the IRS, who was present at the hearing, and no appeal was taken from the court's order confirming the plan. The court finds, as it must, that the IRS claim was provided for by the debtors' plan as required by section 1322(a)(2) of the Code. In re Gregory, 705 F.2d 1118 (9th Cir. 1983).
Having determined that the IRS's claim was provided for by the debtors' plan, we now address the question of dischargeability. In support of its motion for leave to withdraw its claim, the IRS states: "in order to avoid confusion over the effect of having a claim disallowed as untimely the claim should be withdrawn." The IRS is obviously under the impression that if it is permitted to withdraw its claim that its claim would not be disallowed and, therefore, not discharged.
The IRS misconceives the design of chapter 13. The purpose of the chapter is to grant "an individual with regular income" (11 U.S.C. § 101(27)) a fresh start through extension and composition plans, funded out of future income. See 5 Collier, 15th ed. ¶ 1300.12. For a chapter 13 plan to be successful and for the debtor to get his...
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