§ 137.1     Postpetition Claims before BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 137.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Postpetition claims are a complex area of Chapter 13 practice. The Code and Bankruptcy Rules do not manage postpetition claims very well. The result is too much uncertainty for debtors and postpetition claim holders, much complicated strategy serving no obvious good purpose and a growing body of case law that is a testament to the lack of clarity in the Code and Rules.

[2]

“Postpetition claim” is conceptually difficult for bankruptcy practitioners because we are taught under other chapters of the Code that the petition draws the line: bankruptcy deals with debts that exist at the petition. In Chapter 11 cases, the courts have struggled mightily, especially in the toxic tort cases, to identify when a claim arises in order to separate pre- from postpetition debts and to isolate obligations that might be administrative expenses.1 Even with respect to contract claims, it is not always obvious whether a debt based on a prepetition contract that “arises” or “accrues” after the petition is a prepetition or a postpetition claim.2

[3]

Postpetition claims must be distinguished from postpetition defaults under the plan.3 Section 1305 deals only with debts that arise after the petition. Efforts to characterize postpetition defaults as postpetition claims have been appropriately deflected by the courts.4 Defaults under the plan are often addressed by modification of the plan.5

[4]

In Chapter 13 cases, the Code drafters created a new animal—a § 1305 postpetition claim. The closest thing to a postpetition claim under other chapters of the Code is an administrative expense under § 503 that arises after the petition. Unfortunately, there is no cross-reference to § 503 in § 1305. Sometimes a debt that arises after the petition in a Chapter 13 case will qualify as a postpetition claim under § 1305; sometimes it will qualify as an administrative expense under § 503; sometimes it will qualify as neither; maybe it can be both.

[5]

The consequences are important. Sections 507(a)(1) and 503(b) provide a first priority for postpetition debts that are administrative expenses.6 Most Chapter 13 plans and many reported decisions treat administrative expenses as priority claims entitled to full payment without postpetition interest under § 1322(a)(2), notwithstanding the absence of a clear reference to administrative expenses in § 1322(a)(2).7 There is no Code provision requiring full payment of postpetition claims under § 1305. Section 1322(a)(6) permits, but does not mandate, that the Chapter 13 plan provide for the payment of postpetition claims allowed under § 1305.8 Section 1322(a)(6) does not require that the plan provide full payment for § 1305 claims.

[6]

Administrative expenses typically are classified with priority claims to be paid in full through the plan under § 1322(a)(2) but without postpetition interest.9 Postpetition interest is not allowable as part of a postpetition claim under § 1305 because of the cross-reference to § 502 in § 1305(b);10 however, the holder of a postpetition claim can refuse to file a proof of claim unless the debtor agrees to pay the claim in full with interest.11 If a plan is not confirmed, an administrative expense under § 503(b) is entitled to be paid from any funds held by the Chapter 13 trustee before refund to the debtor under § 1326(a)(2).12 The holder of a postpetition claim under § 1305 does not share in the funds held by the trustee if no plan is confirmed.

[7]

In the event of conversion from Chapter 13 to Chapter 7, an administrative expense under § 503 gets second priority of distribution, just behind the administrative expenses in the Chapter 7 case.13 A postpetition claim under § 1305 becomes an ordinary prepetition claim under § 348(d) upon conversion to Chapter 7.14

[8]

A postpetition claim under § 1305 for which no proof of claim is filed is not discharged.15 A postpetition claim for which a proof of claim is filed is discharged if provided for by the plan, even if the plan provided for less than payment in full.16

[9]

The allowance of postpetition claims for consumer debts for property or services necessary for the debtor’s performance under the plan is conditioned that consent of the Chapter 13 trustee must be obtained before incurring the debt, if practicable.17 The Bankruptcy Code imposes no prior consent requirement for the allowance of administrative expenses under § 503. In addition, § 1328(d) excepts from discharge in a Chapter 13 case any postpetition consumer debt for property or services necessary for the debtor’s performance under the plan if the “prior approval by the trustee of the debtor’s incurring such debt was practicable and was not obtained.” There is no similar exception to discharge for administrative expenses under § 503. It has been held that postpetition claims for consumer debts can be classified as administrative expenses under § 503 or as postpetition claims under § 1305 because §§ 503 and 1305 “are not mutually exclusive”; but when they overlap, the claim holder or the debtor must satisfy the prior-approval-of-the-trustee requirement in § 1305 for the claim to be allowable in the Chapter 13 case.18

[10]

Characterization of a debt that arises after the petition as a postpetition claim under § 1305 or as an administrative expense under § 503 has consequences for the timing and method by which the claim holder accomplishes allowance and payment through the plan. The holder of a postpetition claim under § 1305 is permitted to file a proof of claim under § 1305(a).19 Payment of an administrative expense begins with the filing of a “request for payment” under § 503(a).20

[11]

Section 503(a) was amended by the 1994 Act. In cases filed before October 22, 1994, § 503(a) states, “An entity may file a request for payment of an administrative expense.”21 As previously written, § 503(a) put no particular time restrictions on a request for payment of an administrative expense. In cases filed after October 22, 1994, § 503(a) as amended provides: “An entity may timely file a request for payment of an administrative expense, or may tardily file such request if permitted by the court for cause.”22 In Chapter 13 cases filed after October 22, 1994, the holder of an administrative expense faces a timeliness requirement for the filing of a request for payment.

[12]

The Bankruptcy Code does not define timely for the filing of a request for payment of an administrative expense.23 Except at conversion to Chapter 7,24 there is no Bankruptcy Rule that specifically addresses the timeliness of the filing of requests for administrative expenses.

[13]

After the 1994 amendments to § 503(a), it is likely that the courts will attach some consequence to the failure to timely file a request for an administrative expense or to the failure to prove cause for a tardy filing.25 If the consequence is disallowance, then characterization of a postpetition debt as an administrative expense carries with it the possibility that the holder will forfeit the right to payment if the holder fails to meet the timeliness requirements in § 503(a). For example, in In re Guevara,26 the bankruptcy court rejected the debtor’s argument that taxes and insurance paid by a mortgage holder after confirmation were administrative expenses discharged at the completion of payments because the mortgage holder did not timely request payment during the plan. There is no timeliness requirement in the Code for the filing of a proof of claim for a postpetition debt under § 1305.27

[14]

Section 1305 is explicit that proof of a postpetition claim may only be filed “by any entity that holds a claim against the debtor.” Section 503(a) less clearly states that “an entity may timely file a request for payment of an administrative expense,” leaving open the possibility that the entity filing a request for an administrative expense is not necessarily the entity “that holds” the administrative expense.

[15]

The definitions of allowable administrative expenses under § 503(b) and of allowable postpetition claims under § 1305(a)(1) and (2) are similar in many respects, but not exactly the same. For example, a postpetition debt for taxes that becomes payable to a governmental unit while the Chapter 13 case is pending can be an allowable postpetition claim under § 1305(a)(1). A postpetition debt for taxes “incurred by the estate” is allowable as an administrative expense under § 503(b)(1)(B). Some courts have concluded that because of the specific provision for postpetition taxes in § 1305(a)(1), postpetition taxes cannot be administrative expenses under § 503(b).28 Other courts have found that postpetition taxes can be administrative expenses in a Chapter 13 case.29 Still other courts have held that postpetition taxes travel through § 1305 to become priority claims entitled to full payment under § 1322(a)(2).30

[16]

The “actual, necessary costs and expenses of preserving the estate, including wages, salaries or commissions for services rendered after the commencement of the case” are allowable as administrative expenses under § 503(b)(1)(A). Section 1305(a)(2) defines an allowable postpetition claim for “a consumer debt, that arises after the date of the order for relief under this chapter, and that is for property or services necessary for the debtor’s performance under the plan.” There are postpetition debts incurred both for “preserving the estate” and for “property or services necessary for the debtor’s performance under the plan.” For example, the electricity that cooks the debtor’s postpetition meals certainly looks like a “consumer debt, that arises after the date of the order for relief . . . that is for . . . services necessary for the debtor’s performance under the plan.”31 That same electricity keeps the pipes in the debtor’s house from freezing, “preserving the estate” for purposes of § 503(b)(1)(A).

[17]

What happens after confirmation? Under § 1327(b), absent a contrary provision of the plan or the order of confirmation, all property of the estate vests in the debtor at confirmation.32 Many courts have concluded that the vesting of property in the debtor at confirmation under § 1327(b) dissolves or limits the content of the bankruptcy estate.33 Some courts have concluded that the vesting of property in the debtor under § 1327(b) dissolves the automatic stay, exposing the debtor to postconfirmation collection efforts by postpetition claim holders.34

[18]

If the vesting of property in the debtor at confirmation dissolves the estate, then confirmation of a Chapter 13 plan may mark the point in time after which administrative expenses no longer accrue—if the estate is gone, there is no “actual, necessary cost and expense of preserving the estate.35 If the plan does not overcome § 1327(b), a postconfirmation tax liability in a Chapter 13 case could not be “incurred by the estate” under § 503(b)(1)(B)(i) and could not be an administrative expense. Such a tax, if allowable at all, would have to be a postpetition claim under § 1305(a)(1).

[19]

Several courts have concluded that the vesting of property in the debtor at confirmation under § 1327(b) affects characterization of postconfirmation claims. For example, in In re Brilz,36 the court held that property taxes accruing after confirmation and before conversion to Chapter 7 could not be administrative expenses in the Chapter 13 case because the estate vested in the debtor at confirmation. The court in Martinez v. Public Service Co. of Colorado (In re Martinez)37 held that postpetition utility debts were not entitled to administrative priority under § 503 because at confirmation the Chapter 13 estate vested in the debtor, and utility services thereafter could not be for preservation of the estate. In contrast, in In re Kingsley,38 sales taxes accruing after the filing of a Chapter 13 case and before confirmation were incurred by the estate and were administrative expenses entitled to full payment but without postpetition interest under § 1322(a)(2). In Security Bank of Marshalltown v. Neiman,39 the U.S. Court of Appeals for the Eighth Circuit concluded that even if property of the estate vested in the debtor at confirmation, the estate continued to exist and postconfirmation debts for feed and veterinary services for the debtor’s hog herd were administrative expenses under § 503(b)(1)(A).

[20]

With a possible exception for a narrow class of tax claims arising after the petition,40 there is no provision of the Code or Rules authorizing the debtor or the trustee to file proof of a postpetition claim.41 Most reported decisions addressing the question have concluded that only the holder of a postpetition claim can file proof of that claim.42 This conclusion is supported by the language of § 1305(a) that proof of a postpetition claim “may be filed by any entity that holds a [postpetition] claim against the debtor.”43 Bankruptcy Rule 3004—the rule that controls the filing of proofs of claim by the trustee or the debtor—makes no provision for the filing of postpetition claims by any entity other than the holder of such claim.44

[21]

If the postpetition claim holder declines to file a proof of claim, its postpetition claim cannot be allowed. This conclusion is compelled by § 1305(b), which states as the predicate for allowance or disallowance of a postpetition claim that there is “a claim filed under subsection (a) of this section.45 It is the intent of § 1305(a) and (b) that allowance of a postpetition claim is possible only if a proof of claim is filed, and only the holder of a postpetition claim can engage the allowance process by filing a proof of claim.

[22]

Several courts have also concluded that an unfiled postpetition claim cannot be “provided for” by the plan and thus is not dischargeable under § 1328(a).46 This conclusion flows from the interaction of §§ 1322(b)(6), 1305 and 1328(a). Section 1322(b)(6) permits a Chapter 13 plan to “provide for the payment of all or any part of any claim allowed under § 1305 of this title.”47 Under § 1305(a) and (b), a postpetition claim is eligible for allowance only if a proof of claim is filed under § 1305(a). Under § 1305(a), only the entity that holds the postpetition claim can file a proof of claim.48 If the holder declines to file, the postpetition claim is not eligible for allowance and cannot be provided for under § 1322(b)(6). Under § 1328(a), a Chapter 13 debtor is entitled to discharge only with respect to “debts provided for by the plan or disallowed under section 502.”49 A postpetition claim with respect to which no proof of claim has been filed has not been disallowed under § 502. It is not enough for the debtor to amend the schedules to list the postpetition creditor—if the postpetition claim holder declines to file a proof of claim, the postpetition claim will not be discharged at the completion of payments under the plan.50

[23]

The drafters of the Code also wanted to preclude the allowance and the discharge of postpetition consumer debt incurred without the consent of the Chapter 13 trustee when consent was practicable.51 This was accomplished in §§ 1305(c) and 1328(d). Section 1305(c) bars the allowance of a postpetition consumer debt “if the holder of such claim knew or should have known that prior approval by the trustee of the debtor’s incurring the obligation was practicable and was not obtained.”52 Section 1328(d) precludes discharge of a debt based on an allowed postpetition claim “if prior approval by the trustee of the debtor’s incurring such debt was practicable and was not obtained.” The interaction of §§ 1305(c), 1322(b)(6) and 1328(d) is perhaps more complicated than it needs to be.

[24]

A postpetition consumer debt described in § 1305(a)(2) is eligible for allowance if the claim holder files a proof of claim and if one of three conditions is satisfied: (1) prior approval of the trustee was obtained; (2) the claim holder did not know and should not have known of the need to get prior approval of the trustee; or (3) the prior approval of the trustee was not practicable. Because § 1305(b) incorporates § 502 to determine the allowance or disallowance of a postpetition claim,53 a fourth route to allowance for a postpetition claim is possible: if no one objects, proof of a postpetition claim is “deemed allowed” under § 502(a).54

[25]

If the postpetition claim is allowed under § 1305, then the claim can be provided for by the plan under § 1322(b)(6). If it is allowed under § 1305 and provided for under § 1322(b)(6), then upon completion of payments under the plan, the claim will be discharged under § 1328(a) unless prior approval by the trustee of the debtor’s incurring the debt was practicable and was not obtained. In that event, the debt will be allowed, the postpetition claim holder will share in distributions under the plan, but the debt will not be discharged upon completion of payments under the plan.

[26]

If any of the conditions in § 1305(c) are not satisfied—for example, if the claim holder knew or should have known that prior approval of the trustee was necessary and practicable, but did not obtain approval—then the postpetition claim is disallowable under § 1305(c), and the claim holder will not share in distributions under the plan. However, all is not lost because a postpetition consumer debt denied allowance under § 1305(c) cannot be “provided for” under § 1322(b)(6) and will not be discharged upon completion of payments because § 1328(a) only discharges debts “provided for” by the plan or “disallowed under section 502”—disallowance under § 1305(c) will not support discharge of a postpetition claim at the completion of payments under the plan.55

[27]

The message for debtors and (potential) postpetition creditors is the same: get the consent of the Chapter 13 trustee before incurring debt or advancing credit.

[28]

The Bankruptcy Code disables both carrot and stick treatments of postpetition claims: Chapter 13 debtors cannot use threats of disallowance or discharge to force postpetition claim holders to file proofs of claim; nor is the promise of full payment certain to capture the hearts of postpetition lenders (or bankruptcy courts). For example, in In re Sims,56 the debtor moved to modify the confirmed plan to add postpetition medical service providers.57 The proposed modification gave postpetition creditors 90 days to file proofs of claim and disallowed any postpetition claims not filed within that time. Allowed postpetition claims would be paid 2.66 percent and disallowed postpetition claims would be discharged at the completion of payments to other creditors under the plan. The bankruptcy court held that the debtor could not use disallowance and discharge to force postpetition creditors to file proofs of claim:

Section 1322(b)(6) permits a debtor to provide for allowed claims. . . . [I]t follows that claims which are not allowed pursuant to Section 1305 are not “provided for” within the meaning of Section 1322. . . . “[D]ebtors may not ‘sidestep’ § 1305(a)’s requirements through post-confirmation modification under § 1329.” . . . [T]he Debtors are attempting to force the post-petition creditors to file a claim and accept an amount equal to 2.66% of their claim, or be “disallowed” and receive nothing on the claim. . . . [T]hese creditors are not so limited . . . . [T]hey may elect not to file a claim under Section 1305, waive participation in the instant plan, and seek to recover against the debtor after the Chapter 13 case is closed.58
[29]

Taking a different approach, the debtor in In re Brooks59 tried making new friends with a plan modification to pay postpetition utilities 100 percent in advance of other unsecured claims. The bankruptcy court found this separate classification was unfair discrimination against prepetition unsecured claim holders under § 1322(b)(1):60

In this Court’s view there is no justification for giving [the utility] special treatment. . . . The Code provides a framework for the treatment of postpetition utility bills. . . . If the utility elects to protect itself by requiring a deposit for the postpetition services it has little basis to complain, and no reason to request that it come before other prepetition unsecured creditors. From a debtor’s perspective, a debtor is paying prepetition creditors through a Chapter 13 plan from “disposable income,” which is what is left after paying monthly living expenses, food, shelter, and utilities . . . a debtor is expected to comply with his representations and his agreements. To permit a debtor to ignore them, not pay his utility bills and pass that cost on to unsecured prepetition creditors destroys the whole concept of paying his creditors through a Chapter 13 plan.61
[30]

Sims and Brooks illustrate that debtors can neither starve nor feed postpetition creditors into participation in the Chapter 13 plan. The alternative suggested by these cases is to always provide full payment for postpetition claims in the original confirmed plan.62 The reluctant postpetition creditor might be convinced to file a proof of claim if pro rata distribution is promised together with a waiver of discharge of any portion of the postpetition debt that will not be paid through the confirmed plan.63

[31]

The prospects for the postpetition claim holder that chooses not to file a proof of claim are not completely rosy. The postpetition claim holder might be entitled to relief from the stay,64 but don’t count on it, especially when collection of the postpetition claim would disrupt payments under the plan. The claim will survive discharge and be collectible from the debtor after the stay has expired.65 As a practical matter, this means that the postpetition claim holder has to wait until payments to other creditors are completed under the plan, which may be a long time. Absent relief from the stay, the postpetition claim holder is in Neverland for years, a victim of its own decision not to file a proof of claim.

[32]

If the confirmed plan does not provide for full payment of postpetition claims, the best position for the debtor and for the postpetition claim holder may be a consensual modification for pro rata distribution with other unsecured creditors and waiver of discharge of the balance. Most reported decisions permit postconfirmation modification to provide for payment of postpetition claims, but there is contrary authority.66 Postpetition modification under § 1329 is not effective to manage a postpetition claim when the claim holder refuses to file a proof of claim.

[33]

Postpetition taxes are the most common form of § 1305 claim. Section 1305(a)(1) states that “a proof of claim may be filed by any entity that holds a claim against the debtor—for taxes that become payable to a governmental unit while the case is pending.”67 Although there is some disagreement about when taxes “become payable” for § 1305(a)(1) purposes, a significant number of courts, including the U.S. Courts of Appeals for the Fifth and Sixth Circuits, have held that taxes for the year in which the Chapter 13 petition is filed and for each subsequent year during the case fit the definition of postpetition claim in § 1305(a)(1).68

[34]

Many reported decisions hold that only the taxing authority can file a proof of claim for taxes that are postpetition claims under § 1305, and if the taxing authority declines to file a proof of claim, the postpetition taxes are not allowable.69 A § 1305 claim for postpetition taxes for which no proof of claim is filed is not discharged, may be collected from the debtor after the Chapter 13 case or may be collectible after relief from the stay during the case.70

[35]

There may be an exception to the well-recognized rule that only the holder of a postpetition tax claim can file a proof of its claim. As mentioned elsewhere,71 under § 502(i), a claim that arises “after the commencement of the case for a tax entitled to priority under section 507(a)(8)” is determined and allowed or disallowed “under [§ 502] . . . the same as if such claim had arisen before the date of the filing of the petition.”72 Section 502(a) deems allowed any claim “proof of which is filed under section 501 of this title.”73 The cross-reference in § 502(a) to § 501 captures § 501(c): “If a creditor does not timely file a proof of such creditor’s claim, the debtor or the trustee may file a proof of such claim.”74

[36]

Among the taxes entitled to priority under § 507(a)(8) are allowed unsecured claims for “a tax required to be collected or withheld and for which the debtor is liable in whatever capacity.”75 For example, it is arguable that a sales tax collected by a Chapter 13 debtor after the petition would be entitled to priority under § 507(a)(8)(C). Because it “arises” after the commencement of the case, such a sales tax would be determined, allowed or disallowed as if it were a prepetition claim. Does the cross-reference in § 502(a) to § 501(c) then include the possibility that the Chapter 13 debtor or trustee could file a claim on behalf of the taxing authority? Or does the word “creditor” in § 501(c) preclude this outcome because creditor means “entity that has a claim against the debtor that arose at the time of or before the order for relief?76 On the other hand, wouldn’t this limitation be overcome by § 501(d): “a claim of a kind specified in section . . . 502(i) . . . may be filed under [§ 501](a), (b), or (c) . . . as if such claim . . . had arisen before the date of the filing of the petition”?77

[37]

And what about § 1305(a)(1)? Taxes “that become payable to a governmental unit while the case is pending” are postpetition claims under § 1305(a)(1). We know that postpetition claims “may be filed by any entity that holds [the] claim.”78 Under § 1305(b), a § 1305(a) claim for a tax that becomes payable while a Chapter 13 case is pending is “filed under [§ 1305](a)”—a more restrictive provision than the cross-reference in § 502(i) to § 502(a). Once a § 1305(a) postpetition tax claim has been filed, the claim is “determined as of the date such claim arises” and is allowed or disallowed as if such claim “had arisen before the date of the filing of the petition.”79

[38]

The overlap of tax claims arising after the petition under § 502(i) and tax claims that become payable while the Chapter 13 case is pending under § 1305(a)(1) has consequences for Chapter 13 practice. The provision in § 1305(b) to determine a § 1305(a)(1) postpetition tax “as of the date such claim arises” is not precisely parallel to the petition date provision in § 502(i). A difference in calculation could result with respect to interest or penalties accruing after the petition.

[39]

More importantly, the filing of claims and the treatment required by the plan may be different depending on whether the tax is characterized as a postpetition claim under § 1305 or a priority claim arising after the commencement of the case under § 502(i). Almost perfect facts to illustrate the possibilities confronted the bankruptcy court in In re Flores.80

[40]

The debtor in Flores owed sales taxes to the state of Texas for the third quarter of 1999. A Chapter 13 case was filed on August 31, 1999, and the debtor continued to fail to pay sales taxes. After confirmation of a plan, the debtor filed a proof of claim on behalf of the state of Texas for pre- and postpetition sales taxes and moved to modify the plan to pay all the taxes through the plan. The state of Texas objected that the debtor could not file a proof of claim on its behalf for the postpetition taxes under § 1305(a). The debtor argued that the taxes fell within § 502(i) and thus, the debtor could file a claim on behalf of the state under § 501(c).81 The bankruptcy court reconciled §§ 501(c) and (d), 502(i) and 1305 this way:

[W]ith respect to § 507(a)(8) sales tax liability in chapter 13 cases . . . [t]he Debtor may file a proof of claim for the taxing authority if (i) the claim arises postpetition (because, for example, of the due date of the return), (ii) the claim is related to prepetition activity, and (iii) the taxing authority has not filed a claim within the deadline for filing a governmental claim.
        However, the debtor may not file a claim on behalf of a taxing authority with respect to postpetition claims. A postpetition claim, with respect to § 507(a)(8) sales tax liability in chapter 13 cases, is a liability that arises postpetition and relates only to postpetition activity. Bankruptcy Code Section 1305 does not authorize the debtor to file a proof of claim for the creditor for these postpetition claims. There does not appear to be any other statutory authority for the debtor to do so. Bankruptcy Code section 501(c) only authorizes the debtor to file a proof of claim on behalf of a creditor if the creditor does not file the claim timely. Since there is no deadline for filing a postpetition claim, the debtor’s right under § 501(c) never arises. Section 501(d) and Section 502(i) deal with claims for sales taxes that arise after the petition date. Congress used different words in § 1305 when it dealt with postpetition claims.82
[41]

It is arguable from § 502(i) that other kinds of taxes for the year in which a Chapter 13 case is filed are treated as prepetition taxes under § 502(i), not as postpetition claims under § 1305(a)(1). For example, under § 507(a)(8)(A), some taxes “measured by income” that are “assessable . . . after the commencement of the case” are entitled to priority under § 507(a)(8)(A)(iii) and also “arise . . . after the commencement of the case” for purposes of § 502(i). Income taxes (in whole or in part?) for the year in which the Chapter 13 petition is filed might fall in this category and would be “determined and . . . allowed . . . or disallowed” under § 502 “the same as if such claim had arisen before the date of the filing of the petition.”83

[42]

But it has to be admitted that income taxes for the year in which a Chapter 13 petition is filed “become payable” to the taxing authority “while the case is pending” for purposes of § 1305(a)(1). Reconciling § 502(i) and 1305(a)(1) is the struggle begun by the bankruptcy court in Flores.84 In other contexts, the courts have recognized that § 502(i) is easily overread to convert (too) many postpetition tax debts into prepetition priority claims.85

[43]

It has been held that taxes accruing after the petition are postpetition claims under § 1305(a)(1) and cannot also be administrative expenses under § 503.86 This outcome is not obviously required by the Code. Section 1305(a) broadly defines taxes that are allowable as postpetition claims in a Chapter 13 case to include “taxes that become payable to a governmental unit while the case is pending.” Section 503(b)(1) defines taxes that are allowable administrative expenses as

(B) any tax—
(i) incurred by the estate, except a tax of a kind specified in section 507(a)(8) of this title; or
(ii) attributable to an excessive allowance of a tentative carryback adjustment that the estate received, whether the taxable year to which such adjustment relates ended before or after the commencement of the case; and
(C) any fine, penalty, or reduction in credit relating to a tax of a kind specified in subparagraph (B) of this paragraph; . . . .87
[44]

These two definitions seem unavoidably to overlap. Notice that § 503(b)(1)(B) carefully excludes from allowance as an administrative expense any tax of the kind described in § 507(a)(8). Administrative expense status under § 503(b)(1)(B) is not precluded for postpetition tax claims that also fit the definition of postpetition claims in § 1305(a)(1). Neither is there any cross-reference in § 1305(a)(1) to exclude from allowance as postpetition claims taxes that become payable to a governmental unit while the case is pending that also fit the definition of administrative expenses under § 503(b)(1)(B) or (C).

[45]

Other sections of the Bankruptcy Code and Tax Code limit the overlap between administrative expenses under § 503(b)(1)(B) and postpetition claims under § 1305(a)(1). 11 U.S.C. § 346(d) provides that in Chapter 13 cases state or local taxes imposed on or measured by income “may not be taxed to the estate.”88 Because only taxes “incurred by the estate” can qualify as administrative expenses under § 503(b)(1)(B), if the phrase “may not be taxed to the estate” excludes the possibility that a tax is “incurred by the estate,” postpetition state or local income taxes can be postpetition claims in a Chapter 13 case under § 1305(a)(1) but cannot be administrative expenses under § 503(b)(1)(B). In contrast, state or local taxes that are not income based—for example, property taxes and other ad valorem taxes—could be incurred by the Chapter 13 estate and are not taxable only to the debtor under § 346(d).

[46]

Similarly, under 26 U.S.C. §§ 1398 and 1399, no separate taxable entity other than the Chapter 13 debtor is recognized for federal income tax purposes.89 Overlap between administrative expenses under § 503(b)(1)(B) and postpetition claims under § 1305(a)(1) can occur with respect to federal taxes other than income taxes.

[47]

One reported decision gives an example of a tax incurred after the filing of a Chapter 13 petition that was held to be an administrative expense under § 503(b). In In re Kingsley,90 the debtor accrued sales taxes after the filing of a Chapter 13 case and before the hearing on confirmation. The state of Connecticut filed an objection to confirmation, arguing that it was entitled to interest on the sales taxes incurred by the estate. The bankruptcy court held that unpaid sales taxes incurred by the estate were administrative expenses under § 503(b)(1)(B) with a first priority under § 507(a)(1).91 However, this holding did not get the state what it wanted—postpetition interest. Because the postpetition taxes were administrative expenses, the court held that the full-payment requirement in § 1322(a)(2) applied, but without present value interest.92 Had the sales tax claim been characterized as a postpetition claim under § 1305, Connecticut could have withheld filing proof unless the debtor agreed to pay postpetition interest.

[48]

Kingsley suggests that the debtor’s best position is to characterize a postpetition tax claim as an administrative expense under § 503, rather than as a postpetition claim under § 1305, at least so long as the Chapter 13 case does not fail before confirmation. Characterized as an administrative expense under § 503, the postpetition tax will be entitled to first priority under § 507(a)(1). The debtor can then argue the tax is a priority claim entitled to full payment through the plan under § 1322(a)(2), without postpetition interest.

[49]

The taxing authority would rather be a postpetition claim holder under § 1305, unless the case fails before confirmation. A § 1305 postpetition tax claim typically has to be paid postpetition interest because the holder will not file a proof of claim unless the plan pays postpetition interest. If the claim holder refuses to file a proof of claim, the postpetition tax claim is not discharged by § 1328.93

[50]

At conversion to Chapter 7, expenses of administration during the Chapter 13 case realize somewhat better treatment than other postpetition claims. Under § 348(d), postpetition claims of the § 1305 variety become ordinary prepetition claims at conversion to Chapter 7.94 In contrast, administrative expenses accrued during the Chapter 13 case are excepted from the effect of § 348(d) at conversion. Unpaid administrative expenses from the Chapter 13 case are entitled to second priority of distribution, just behind the expenses of administration of the Chapter 7 case.95 For example, taxes incurred during the Chapter 13 case that are characterized as expenses of administration under § 503(b) do not become prepetition claims in the Chapter 7 case under § 348(d) and would have second priority of distribution after conversion. A postpetition tax treated as a postpetition claim under § 1305(a)(1) and refused administrative expense status under § 503(b) becomes a prepetition claim by virtue of § 348(d) at conversion to Chapter 7 and would have its ordinary priority under § 507(a)(8) upon distributions under § 726.96 Characterization of the postpetition debt as an administrative expense during the Chapter 13 case does not affect the dischargeability of the debt after conversion to Chapter 7.97

[51]

Because § 1326(a)(2) gives unpaid administrative expenses first call on any money held by the trustee in a failed case,98 at dismissal before confirmation, the debtor is better off if postpetition taxes are characterized as postpetition claims under § 1305. Then the debtor does not compete with the taxing authority for return of the money held by the trustee. But recent cases suggest that the tax collector is not without remedies: if the taxing authority acts quickly, it can levy on the funds held by the trustee before refund to the debtor.99

[52]

It isn’t clear how the debtor or the postpetition tax claim holder will take all of these (conflicting) positions during the same Chapter 13 case. Can a postpetition tax claim be both an administrative expense under § 503(b) and a postpetition claim under § 1305(a)(1) at different times in the same case?

[53]

Characterizing taxes that become payable while the Chapter 13 case is pending as postpetition claims under § 1305 affects the timing for the filing of proofs of claim. Neither the Code nor the Rules fix a deadline for the filing of proof of a postpetition tax claim under § 1305.100 Although the IRS cannot use the postpetition claims provisions of § 1305 to overcome its failure to timely file proof of a prepetition tax,101 if the tax became payable while the case was pending, the courts have recognized that it is a postpetition claim, proof of which can be filed without regard to the limitations in Bankruptcy Rule 3002(c).102

[54]

The reported decisions are struggling to apply the cross-reference to § 502 in § 1305(b)103 when the postpetition claim holder does file a proof of claim. Section 1305(b) states that a postpetition claim filed under § 1305(a) “shall be allowed or disallowed under section 502 of this title, but shall be determined as of the date such claim arises, and shall be allowed under section 502(a), 502(b) or 502(c) of this title . . . the same as if such claim had arisen before the date of the filing of the petition.”104 This cross-reference is not a perfect fit because § 502 contemplates debts that arise before the petition; § 1305 concerns just the opposite—debts that arise after the petition. The allowance of prepetition claims under § 502 has evolved over many decades based on policy considerations very different from those that might form the treatment of postpetition claims.

[55]

For example, in In re Reamy,105 the debtor filed a Chapter 13 case before July 1, 1994. Under state law, real estate taxes for the tax year 1994–95 constituted a lien against property of the debtor as of July 1, 1994. The bankruptcy court concluded that real estate taxes for 1994–95 were a postpetition claim under § 1305, proof of which could be filed at the discretion of the taxing authority. The taxing authority filed a proof of claim for 1994–95 real property taxes. Looking to § 1305(b), the bankruptcy court held that the filing of a proof of claim “transformed” the (postpetition) debt into a claim that had to be treated as if it arose before the petition for purposes of allowance under § 502 and for purposes of the automatic stay. As explained by the court:

Thus, it may be that the filing by Prince George’s County of the proof of claim has caused its post-petition obligation (which did not need to be dealt with under the plan, and if not dealt with would not have been discharged pursuant to 11 U.S.C. § 1328) to be transformed into a claim allowed under Section 502 and which is subject to discharge pursuant to Section 1328(a). In addition, the transposition of this claim to a claim arising as of the petition date would apparently invoke the automatic stay of 11 U.S.C. § 362(a)(5) and prevent the enforcement of the lien against the property of the debtor, even after the confirmation.106
[56]

Picking up the same logic, several courts have considered whether the cross-reference to § 502 in § 1305 carries with it the priorities that would apply to claims under § 507(a). In In re King,107 the plan confirmed in 1994 provided that priority claims and § 1305 claims would be paid in full. After the debtor completed payment of all prepetition claims, the IRS filed a large claim for postpetition taxes. There was no dispute that the claim was a postpetition claim and that the debtor could not pay the claim in full within the 60-month time limit for the plan. The bankruptcy court held that the postpetition claim was entitled to priority under § 507(a)(8) and to full payment through the plan under § 1322(a)(2); accordingly, the plan failed and was dismissed. The court explained that the postpetition tax claim became a priority claim through the claims allowance process in § 502:

Section 1305(b) creates, in effect, a legal fiction. Although in reality the IRS claim arose postpetition, it is allowed under section 502(b) as though it arose pre-petition. As a pre-petition claim, section 507(a)(8) becomes applicable and the IRS claim becomes a priority claim. . . . [T]he IRS claim for post-petition taxes must be allowed under section 1305 and must be satisfied in full under the Plan. . . . The Plan provides in paragraph 1 for the full payment of priority and section 1305(a)(1) claims . . . . Since substantial tax claims remain unpaid, the Court finds dismissal for nonpayment is warranted.108
[57]

In contrast to King, the bankruptcy court in In re Jagours109 concluded that postpetition taxes were a § 1305 postpetition claim that was not entitled to priority or full payment under § 1322(a)(2). On facts not distinguishable from King, the Jagours court explained:

[T]he only way a tax liability can attain priority status is to be for a tax year that ends prior to the petition date with a return due date prior to the petition date. None of the tax periods represented by the amended claim fall within this category and therefore, cannot constitute a priority debt. . . .  The Court is aware of the holdings in In re King, 217 B.R. 623 (Bkrtcy.S.D.Cal. 1998) and In re Bryant, 1998 WL 412632 (Bkrtcy.E.D.Va. 1998) both of which hold that an IRS claim filed under § 1305(a)(1) becomes a priority claim. . . . Both of these cases believe that [§ 1305(b)] requiring the claims to be allowed or disallowed under various provisions of 502 of the Code make them a pre-petition claim for all purposes including the application of section 507(a)(8) to determine their priority. This Court believes that to be an erroneous reading of 1305(b) and finds that that subsection merely sets forth the standards for the Court to use in allowing or disallowing the claim on its merits. There is no reason to believe that Congress would have intended that section to also deal with the priority status of the claim under 507(a)(8) unless it listed 507(a)(8) in the list of statutes to be considered.110
[58]

Are Reamy and King overreading § 1305(b) of the Code? Section 1305(b) indeed provides that a proof of claim filed by a postpetition claim holder is allowed or disallowed under § 502 “as if such claim had arisen before the date of the filing of the petition.”111 Does it follow that § 1305(b) “transforms” the postpetition claim into a prepetition debt for all purposes? The answer to this question is particularly pointed with respect to postpetition taxes. Arguably, a debtor’s failure to pay postpetition taxes is misconduct that should not be rewarded by empowering the debtor to pay postpetition taxes as a priority claim ahead of prepetition creditors but without postpetition interest under § 1322(a)(2). In this context, ironically the debtor is rewarded and the taxing authority is punished by granting the postpetition tax claim priority status under § 507(a)(8). On the other hand, if the debtor dismissed and refiled, the postpetition taxes would end up as priority claims in the subsequent Chapter 13 plan, entitled to full payment but without postpetition interest.

[59]

And what about § 502(i)?112 What if the property tax in Reamy was “assessed” before the commencement of the Chapter 13 case and was entitled to priority under § 507(a)(8)(B)? Would the property tax be determined, allowed or disallowed under § 502 “as if such claim had arisen before the date of the filing of the petition,”113 or would the property tax be allowed or disallowed under § 502 “as if such claim had arisen before the date of the filing of the petition” but “determined as of the date such claim arises”?114 The lack of parallelism between § 502(i) and § 1305(b) could make a difference in the calculation of the amount of tax even though both sections apply § 502 for purposes of allowance or disallowance.

[60]

One issue in Reamy was directly addressed by Congress in the Bankruptcy Reform Act of 1994—the perfection of postpetition property tax liens. The 1994 Act created a new exception to the automatic stay for “the creation or perfection of a statutory lien for an ad valorem property tax imposed by the District of Columbia or a political subdivision of a state, if such tax comes due after the filing of the petition.”115 In Chapter 13 cases filed after October 22, 1994, a taxing authority does not need relief from the stay to create or perfect a lien for property taxes that become due after the filing of the petition.116

[61]

Section 1305(a)(2) permits the filing and allowance of a postpetition claim for a “consumer debt . . . for property or services necessary for the debtor’s performance under the plan.” “Consumer debt” means “debt incurred by an individual primarily for a personal, family, or household purpose.”117 It has been held that the postpetition purchases of a telephone, a fan, an iron, a color television, a watch, a picture and a bedroom suite were not necessary for the debtor’s performance and not allowable under § 1305(a)(2).118 Postpetition medical services are within the contemplation of § 1305.119 Debts to a check-cashing service can be allowable postpetition claims when the cash advances are used for rent and utilities.120 Food and transportation are consumer debts necessary for the debtor’s performance under the plan, but postpetition fire damage to the debtor’s residence allegedly caused by the debtor’s negligence does not qualify under § 1305.121 A postpetition debt for car insurance is a consumer debt that could be allowable under § 1305.122 A microwave, couch, love seat and television are not necessities for purposes of § 1305.123

[62]

A good illustration of how the complicated interaction between administrative expenses under § 503 and postpetition claims under § 1305 can trap a creditor is In re Wilder.124 The debtor in Wilder owned an interest in real property at Ashleytowne Village that was subject to “regime fees” for maintenance and common areas. The debtor’s Chapter 13 petition was filed in September of 1994, and Ashleytowne Village had notice of the case. Ashleytowne did not file a timely proof of claim. In March of 1997, relief from the stay was granted to the first mortgage holder on the debtor’s unit. The first mortgage holder began a foreclosure. Ashleytowne had a lien to secure unpaid postpetition regime fees. Ashleytowne filed a claim for the postpetition regime fees. The trustee and the debtors objected.

[63]

Ashleytowne first argued that its claim was an administrative expense entitled to priority under § 503(a)(1) because the postpetition regime fees were a necessary cost of preserving the estate. Applying § 503(a) as amended in 1994,125 the bankruptcy court concluded that the claim for postpetition regime fees could not be allowed as an administrative expense because Ashleytowne did not explain why it waited 28 months to file its request:

Creditor has failed to explain the reasons for the tardy filing of its claim and has ignored the strictures of § 503(a) which requires a creditor to timely file a request for allowance of an administrative claim. Further, creditor has failed to proffer any cause for the tardiness of its claim which is explicitly required by § 503(a).126
[64]

The bankruptcy court then observed that even if cause were shown to allow the tardy filing of an administrative expense, § 503(b) “addresses property and services necessary for preserving the estate” and was “not applicable at this juncture in this Chapter 13 case” because relief from the stay had been granted to the first mortgage holder and the property vacated by the debtor. Accordingly, the allowance of the creditor’s claim was governed by § 1305(a)(2), not by § 503(b).

[65]

But Ashleytowne jumped right out of the pan and into the fire. If the regime fees were property or services necessary for the debtor’s performance under the plan as described in § 1305(a)(2), then § 1305(c) applied and the postpetition claim must be “disallowed if the holder of such claim knew or should have known that prior approval by the trustee of the debtors’ incurring the obligation was practicable and was not obtained.”127 The bankruptcy court held that the regime fees were not allowable postpetition claims under § 1305(a)(2) because of § 1305(c):

In this case, Creditor had knowledge that the Chapter 13 case had been filed, and received a proof of claim form along with the notice of the commencement of the case. Despite having actual notice and a proof of claim form, creditor chose to ignore its remedies under the Bankruptcy laws to file a proof of claim or obtain relief from the automatic stay. The essence of § 1305(c) is to prevent such an occurrence which results in diminishing the monies available for distribution to creditors who timely filed their claims upon receiving notice of the filing of the case. . . . Creditor should have known that prior approval by the Trustee was necessary and failed to obtain such approval.128
[66]

Wilder should be a wake-up call for all postpetition creditors. A debt that looked a lot like an administrative expense was disallowed in Wilder because no timely request was filed. Recharacterized as a postpetition claim, the special rules in § 1305(c) applied and again barred allowance. The creditor was left with its lien rights outside bankruptcy but missed all of its opportunities for payment through the Chapter 13 plan.

[67]

Is a postpetition claim holder entitled to postpetition interest?129 Section 1305(b) provides that allowance of a filed postpetition claim is controlled by § 502 as if the claim existed at the petition, except that the amount of the claim is determined as of the date it arose. Applying § 502(b)(2) literally precludes allowance of unmatured interest—interest accruing on the postpetition claim after the date the claim arose. This is substantial incentive for a postpetition creditor to withhold filing a proof of claim and collect the claim with accrued interest after discharge. One court avoided this result by holding that § 1305(a)(1) requires postpetition interest on postpetition tax claims at the rate specified in the taxing authority regulations.130 If this holding is correct, postpetition tax claim holders would almost always prefer to be treated as postpetition claims under § 1305, at least until the case is dismissed or converted.131 It is a curious result that the Code seems to prohibit allowance of postpetition interest on postpetition claims but allows the claim holder to preserve its right to collect postpetition interest by simply refusing to file a proof of claim. Any proposal to separately classify postpetition claims for full payment with interest would be measured against the unfair-discrimination standard in § 1322(b)(1).132

[68]

One traditional administrative expense that arises after the petition about which there seems to be some agreement is attorneys’ fees. It has occurred to some attorneys in Chapter 13 cases to avoid the usual procedures for the allowance of fees by filing postpetition claims under § 1305 rather than a request for payment of an administrative expense. It has been held that postpetition attorneys’ fees in a Chapter 13 case are not § 1305 claims, but rather are administrative expenses entitled to priority and full payment, subject to the ordinary procedures and standards under § 330.133

[69]

Chapter 13 debtors engaged in business are more likely than ordinary wage earners to have problems with debts that arise after the petition. By definition, a self-employed debtor who “incurs trade credit in the production of income” is a debtor engaged in business.134 Trade credit incurred after the petition will be postpetition debt, but not of the sort contemplated by § 1305. Section 1305(a)(2) only permits allowance of postpetition claims for “consumer debt,”135 defined in 11 U.S.C. § 101(8) as “debt incurred by an individual primarily for a personal, family, or household purpose.” There is legislative history to support the view that nonconsumer debts were purposefully omitted from the definition of postpetition claims in § 1305(a)(2).136 Trade credit for a Chapter 13 debtor engaged in business is not managed through the postpetition claims process in § 1305.

[70]

If postpetition trade credit is not allowable under § 1305, would it be entitled to administrative expense status under § 503(b)? If the estate vested in the debtor at confirmation under § 1327(b),137 is postpetition trade credit necessary for preservation of the estate? The U.S. Court of Appeals for the Eighth Circuit has held that postpetition debts for feed and veterinary services for a Chapter 13 debtor’s hog herd were administrative expenses under § 503(b)(1)(A), notwithstanding the vesting effect of confirmation under § 1327(b).138 Another court held that royalties payable upon a business debtor’s postpetition rejection of a franchise agreement were administrative expenses under § 503(b)(1)(A) entitled to full payment through the plan under § 1322(a)(2).139 It has been held that a creditor who extends unsecured credit to a debtor engaged in business after confirmation but without knowledge of the Chapter 13 case is entitled to collect its debt in state court.140

[71]

One common and troublesome problem with “postpetition debt” in Chapter 13 cases is not a § 1305 issue at all: obligations that arise under a home mortgage during the Chapter 13 case. The notes and deeds of trust that memorialize home mortgages typically contain fees, charges and expenses that become payable after the petition in addition to the continuing principal and interest payments.141 It cannot be said that obligations arising under a prepetition home mortgage contract are postpetition claims under § 1305. The mortgage contract is a prepetition debt. Postpetition accruals may be unmatured and unliquidated at the petition, but § 1305 is not implicated. If not paid when due, mortgage contract entitlements that arise after the petition can be dealt with as postpetition defaults curable through the plan under § 1322(b)(5) or by modification under § 1329.142


 

1  See, e.g., In re UNR Indus., 29 B.R. 741 (N.D. Ill. 1983); In re Amatex Corp., 30 B.R. 309 (Bankr. E.D. Pa. 1983).

 

2  See, e.g., In re Tomasevic, 275 B.R. 86 (Bankr. M.D. Fla. 2001) (Citing Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666, reh’g denied, 531 U.S. 1185, 121 S. Ct. 1173, 148 L. Ed. 2d 1030 (2001), mortgage holder’s attorney’s fees that accrued postpetition are postpetition claims that are not included in the arrearage or in the oversecured claim filed by the mortgage holder and the bankruptcy court lacks jurisdiction to determine the mortgage holder’s entitlement to or the reasonableness of those postpetition fees.); In re Wilder, 225 B.R. 600 (Bankr. D.S.C. 1997) (After consideration of Fourth Circuit law, court concludes that regime fees that accrued after a Chapter 13 petition with respect to real property owned by the debtor are postpetition claims under § 1305, not administrative expenses under § 503 and not prepetition claims.).

 

3  See §§ 244.1 [ Postconfirmation Default and Relief from the Stay ] § 124.4  Postconfirmation Default and Relief from the Stay and 259.1 [ To Cure Postconfirmation Default ] § 127.2  To Cure Postconfirmation Default.

 

4  See In re Minick, 63 B.R. 440 (Bankr. D.D.C. 1986) (Postpetition arrearages on home mortgage are an element of curing default with respect to prepetition debt for purposes of § 1322(b)(5).); In re Mannings, 47 B.R. 318 (Bankr. N.D. Ill. 1985) (Postpetition mortgage arrearages are not postpetition debts and can be treated by plan.); Federal Nat’l Mortgage Ass’n v. Moore (In re Shahid), 27 B.R. 673 (Bankr. S.D. Ohio 1982) (Debtor in default of direct payments to home mortgage holder is not permitted to file a postpetition claim on behalf of the mortgage company to cure the postpetition arrearages through the plan.).

 

5  See § 259.1 [ To Cure Postconfirmation Default ] § 127.2  To Cure Postconfirmation Default.

 

6  See § 73.2  What Claims Are Priority Claims?, § 73.7  Secured Priority Claims?§ 73.10  Filing Fees, § 136.1  Treatment of Priority Claims and § 136.18  Secured Priority Claims before BAPCPABAPCPA changed the rules and treatment for certain postpetition claims. See § 137.2  Postpetition Claims after BAPCPA; see also § 73.1  Plan Must Provide Full Payment and § 136.1  Treatment of Priority Claims

 

7  See § 73.2  What Claims Are Priority Claims? and § 73.3  Priority Claims Added or Changed by BAPCPA and discussion beginning at § 136.1  Treatment of Priority Claims.

 

8  See § 204.1 [ Providing for Postpetition Claims ] § 113.6  Providing for Postpetition Claims.

 

9  See § 73.1  Plan Must Provide Full Payment, § 73.2  What Claims Are Priority Claims?§ 73.3  Priority Claims Added or Changed by BAPCPA§ 136.1  Treatment of Priority Claims and § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

10  11 U.S.C. § 502(b)(2) disallows a claim for “unmatured interest.” 11 U.S.C. § 1305(b) states that a proof of a postpetition claim “shall be allowed or disallowed under section 502 . . . as of the date such claim arises.” See below in this section.

 

11  See discussion below in this section, and see § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

12  See § 142.5  On Postpetition Claims, § 143.1  In Cases Filed before October 22, 1994§ 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA and § 153.1  In General.

 

13  11 U.S.C. § 726(b).

 

14  See § 314.1 [ On Postpetition Claims ] § 142.5  On Postpetition Claims.

 

15  See discussion below in this section, and see § 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

16  See § 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

17  11 U.S.C. § 1305(c). See below in this section, and see § 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

18  In re Clayburn, 112 B.R. 434, 435 (Bankr. N.D. Ala. 1990) (Postpetition debt for insurance on the debtor’s car was a consumer debt necessary to the debtor’s performance under the plan, but neither the debtor nor the insurance company contacted the Chapter 13 trustee before the debt was incurred, and consent of the trustee was not impracticable. Although the insurance claim “may be” an administrative expense, the claim “is also a postpetition claim. The provisions of 11 U.S.C. § 503 and 11 U.S.C. § 1305 are not mutually exclusive. Consequently, a postpetition claim for a consumer debt for property or services necessary for the debtor’s performance under the plan shall be disallowed if the claimant should have known prior approval by the trustee was practicable and was not obtained even if the debt could also be classified as an administrative expense.”).

 

19  See discussion below in this section, and see §§ 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

20  See §§ 275.2 [ In General: Filing is Required for Allowance ] § 132.2  In General: Filing is Required for Allowance and 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

21  11 U.S.C. § 503(a) (before amendment in 1994).

 

22  11 U.S.C. § 503(a), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 213, 108 Stat. 4106 (1994).

 

23  11 U.S.C. § 502(b)(9) might be (mis?)interpreted to fix a 180-day definition for the timely filing of an administrative expense request by a governmental unit. See §§ 276.1 [ Governmental Units ] § 132.3  Governmental Units and 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

24  Bankruptcy Rule 1019(6) provides, “A request for payment of an administrative expense incurred before conversion of the case is timely filed under § 503(a) of the Code if it is filed before conversion or a time fixed by the court.” Fed. R. Bankr. P. 1019(6). See § 314.1 [ On Postpetition Claims ] § 142.5  On Postpetition Claims.

 

25  See In re Wilder, 225 B.R. 600 (Bankr. D.S.C. 1997) (In a case filed before the 1994 amendments to § 503(a), creditor’s delay from September of 1994 to April of 1997 without cause rendered its administrative expense request tardy and disallowable under § 503(a).).

 

26  258 B.R. 59 (Bankr. S.D. Fla. 2001).

 

27  See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

28  See, e.g., In re Gyulafia, 65 B.R. 913 (Bankr. D. Kan. 1986), and In re Walker, 66 B.R. 125 (Bankr. D. Kan. 1984), discussed below in this section.

 

29  See, e.g., In re Kingsley, 86 B.R. 17 (Bankr. D. Conn. 1988), discussed below in this section.

 

30  See, discussed below in this section, In re King, 217 B.R. 623 (Bankr. S.D. Cal. 1998); In re Bryant, No. 94-13471, 1998 WL 412632 (Bankr. E.D. Va. Apr. 24, 1998) (unpublished).

 

31  11 U.S.C. § 1305(a)(2).

 

32  See § 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate. See also § 207.1 [ Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) ] § 113.11  Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b).

 

33  See §§ 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate and 231.1 [ 11 U.S.C. § 1327(c): Free and Clear Effect on Liens ] § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens.

 

34  See §§ 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate and 243.1 [ Does Confirmation Dissolve the Stay? ] § 124.3  Does Confirmation Dissolve the Stay?. See, e.g., In re Henline, 242 B.R. 459 (Bankr. D. Minn. 1999) (Condominium association is free of the automatic stay to collect postpetition dues and expenses from the debtors and by foreclosure of its lien on the debtors’ property. All property of the estate vested in the debtors at confirmation under § 1327(b). Confirmed plan did not provide for payment of postpetition dues. Section 1305 permits the association to elect not to collect its postpetition debt from the estate, but to instead proceed directly, without the need for relief from the stay, against the debtors or against the property that vested in the debtors at confirmation.).

 

35  11 U.S.C. § 503(b)(1)(A) (emphasis added). See § 238.2 [ Effects of Confirmation on Postpetition Claims ] § 122.4  Effects of Confirmation on Postpetition Claims.

 

36  96 B.R. 308 (Bankr. D. Mont. 1989).

 

37  92 B.R. 916 (Bankr. D. Colo. 1988).

 

38  86 B.R. 17 (Bankr. D. Conn. 1988).

 

39  1 F.3d 687 (8th Cir. 1993).

 

40  See below in this section, and see § 134.1  Timing, Form, Superseding and Amended Claims before 2005 and § 136.2  Taxes before BAPCPASee also § 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004 and § 136.3  Taxes after BAPCPA.

 

41  See § 132.9  Postpetition Claims, § 134.1  Timing, Form, Superseding and Amended Claims before 2005, § 134.3  Strategic Considerations: When to File Claims for Creditors and § 136.2  Taxes before BAPCPA. See also § 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004 and § 136.3  Taxes after BAPCPA.

 

42  In re Seyden, 294 B.R. 418 (Bankr. S.D. Ga. 2002); In re Sims, 288 B.R. 264 (Bankr. M.D. Ala. 2003); In re Brooks, Nos. 95-81556, 95-82425, 95-81388, 2002 WL 31760206 (Bankr. C.D. Ill. Dec. 10, 2002) (unpublished); In re Wilkoff, No. 98-34354DWS, 2001 WL 91624 (Bankr. E.D. Pa. Jan. 24, 2001) (unpublished); United States v. Beane (In re Beane), No. 1-96-03487, 2000 WL 33180213 (Bankr. M.D. Pa. Nov. 29, 2000) (unpublished); In re Bagby, 218 B.R. 878 (Bankr. W.D. Tenn. 1998); In re Epstein, 200 B.R. 611 (Bankr. S.D. Ohio 1996); In re Smith, 192 B.R. 712 (Bankr. E.D. Tenn. 1996); In re Hudson, 158 B.R. 670 (Bankr. N.D. Ohio 1993); In re Trentham, 145 B.R. 564 (Bankr. E.D. Tenn. 1992); In re Goodman, 136 B.R. 167 (Bankr. W.D. Tenn. 1992); In re Martin, 130 B.R. 349 (Bankr. M.D. Fla. 1991); RTO Rents v. Benson (In re Benson), 116 B.R. 606 (Bankr. S.D. Ohio 1990); In re Farquhar, 112 B.R. 34 (Bankr. D. Colo. 1989); In re Roseboro, 77 B.R. 38 (Bankr. W.D.N.C. 1987); In re Rothman, 76 B.R. 38 (Bankr. E.D.N.Y. 1987); In re Gyulafia, 65 B.R. 913 (Bankr. D. Kan. 1986); Hester v. Powell, 63 B.R. 607 (Bankr. E.D. Tenn. 1986); In re Dickey, 64 B.R. 3 (Bankr. E.D. Va. 1985); In re Pritchett, 55 B.R. 557 (Bankr. W.D. Va. 1985); In re Wright, 66 B.R. 125 (Bankr. D. Kan. 1984); In re Hefner, 32 B.R. 382 (Bankr. W.D.N.Y. 1983); Federal Nat’l Mortgage Ass’n v. Moore (In re Shahid), 27 B.R. 673 (Bankr. S.D. Ohio 1982). See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims. But see In re Zook, 144 B.R. 489, 490 (Bankr. D. Idaho 1991) (Taxes that accrued both pre- and postpetition and that were payable on the date of the petition are postpetition claims under § 1305. Chapter 13 debtor is authorized by 11 U.S.C. § 501(c) and Bankruptcy Rule 3004 to file a claim on behalf of the state for the postpetition taxes. “The claim is for postpetition taxes, and is thus authorized as a postpetition claim for treatment in the debtor’s plan under Section 1305(a). [The state] does not dispute the amount of the claim, and shows no prejudice as a result of the debtors’ filing of the claim. The filing of a claim by a debtor for a taxing entity under 11 U.S.C. § 501(c) and F.R.B.P. 3004 is not specifically prohibited by any statute or rule.”). See also In re Flores, 270 B.R. 203, 206–09 (Bankr. S.D. Tex. 2001), discussed below in this section.

 

43  11 U.S.C. § 1305(a).

 

44  See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

45  11 U.S.C. § 1305(b) (emphasis added).

 

46  See §§ 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502 and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims. See, e.g., In re Sims, 288 B.R. 264, 267–69 (Bankr. M.D. Ala. 2003) (Postpetition medical service providers have option whether to file proof of claim. “Section 1322(b)(6) permits a debtor to provide for allowed claims. . . . [I]t follows that claims which are not allowed pursuant to Section 1305 are not ‘provided for’ within the meaning of Section 1322. . . . [T]hey may elect not to file a claim under Section 1305, waive participation in the instant plan, and seek to recover against the debtor after the Chapter 13 case is closed.”); In re Parffrey, 264 B.R. 409 (Bankr. S.D. Tex. 2001) (Postpetition claim for federal income taxes is not dischargeable because IRS did not file a § 1305 claim.); In re Wilkoff, No. 98-34354DWS, 2001 WL 91624, at *7 (Bankr. E.D. Pa. Jan. 24, 2001) (unpublished) (Postpetition claim for income taxes is not dischargeable at the completion of payments because the IRS did not file a proof of claim. “[W]hen a holder chooses not to file a claim under § 1305(a), the claim is neither ‘allowed’ or ‘disallowed.’ . . . [I]f a claim for ‘taxes that become payable . . . while the case is pending’ is not filed and, therefore, not allowed pursuant to § 502, it cannot be provided for in a Chapter 13 plan. . . . [O]nly debts that ‘have been provided for by’ a Chapter 13 plan or ‘disallowed under section 502’ are discharged under § 1328(a). . . . Consequently, when a holder chooses not to file a claim under § 1305(a), the claim is not discharged.”); In re Epstein, 200 B.R. 611 (Bankr. S.D. Ohio 1996) (That the debtor amended plan after confirmation to provide for the payment of postpetition taxes does not accomplish discharge because IRS chose not to file a proof of its postpetition claim.); In re Smith, 192 B.R. 712 (Bankr. E.D. Tenn. 1996) (Postpetition claims are not “provided for” and thus are not allowed or discharged by merely adding the creditors to the schedules and statements where the claim holder declines to file proof of its postpetition claim.); In re Hudson, 158 B.R. 670 (Bankr. N.D. Ohio 1993) (Even if the debtors wanted to include taxes for postpetition tax years in their plan, they could not do so without cooperation from the IRS. The debtor cannot require the IRS to file a proof of claim nor can the debtor force the discharge of a postpetition tax liability without payment. The government can choose not to file a proof of claim, not to have an allowed postpetition claim, and not to be discharged upon completion of payments under the plan.); Matravers v. United States (In re Matravers), 149 B.R. 204 (Bankr. D. Utah 1993) (The IRS’s failure to file a proof of claim precludes payment of the postpetition tax liability through the plan. The tax claim for the year in which the Chapter 13 case was filed will survive discharge, although the IRS must wait until the case is closed to collect.); In re Sorge, 149 B.R. 197, 203 (Bankr. W.D. Okla. 1993) (“[Section] 1322(b)(6) permits provision in a Chapter 13 plan only for those postpetition claims allowed under § 1305. Since a claim may not be allowed under § 502 unless a proof of the claim has been filed, a § 1305 claim as to which no claim has been filed may not be allowed and, under § 1322(b)(6), may not be provided for by the Chapter 13 plan or, under § 1328(a), discharged at the completion of payments under the plan.”); In re Trentham, 145 B.R. 564 (Bankr. E.D. Tenn. 1992) (Section 1322(b)(6) permits debtor to provide for postpetition consumer claims that are allowed under § 1305(a)(2); however, the postpetition consumer creditor controls whether a proof of claim will be filed. To accomplish allowance, payment and discharge of postpetition claims, the confirmed plan must provide for payment of all or part of the postpetition claim, the postpetition claim holder must file a proof of claim, the debtor and/or prospective postpetition consumer creditor must obtain the trustee’s approval before the debt is incurred and so forth.); In re Goodman, 136 B.R. 167 (Bankr. W.D. Tenn. 1992) (Postpetition medical services are within the contemplation of § 1305(a); however, postpetition creditors who choose not to file a proof of claim cannot hold an allowed postpetition claim and thus may not be provided for by the debtors’ confirmed plan under § 1322(b)(6).); In re Roseboro, 77 B.R. 38 (Bankr. W.D.N.C. 1987) (A Chapter 13 plan may not provide for a postpetition claim under § 1305(a)(2) unless the claim holder files a proof of claim. A postpetition claim that is not allowed because not filed cannot be provided for by the plan and is not discharged under § 1328.); In re Rothman, 76 B.R. 38 (Bankr. E.D.N.Y. 1987) (Section 1305 permits a claim to be filed for postpetition taxes, but option lies with the taxing authority. If taxing authority declines to file proof of claim, postpetition taxes are not discharged and may be collected from the debtor after Chapter 13 case is completed.); In re Gyulafia, 65 B.R. 913 (Bankr. D. Kan. 1986) (IRS has a choice of filing a claim under § 1305 or seeking relief from the stay.); Hester v. Powell, 63 B.R. 607 (Bankr. E.D. Tenn. 1986); In re Pritchett, 55 B.R. 557 (Bankr. W.D. Va. 1985) (Postpetition providers of medical services who fail or choose not to file proofs of claim cannot hold “allowed” postpetition claims and thus may not be “provided for” by the debtor’s Chapter 13 plan pursuant to § 1322(b)(6). Postpetition claims that are not allowed are not subject to discharge.).

 

47  11 U.S.C. § 1322(b)(6) (emphasis added). See § 204.1 [ Providing for Postpetition Claims ] § 113.6  Providing for Postpetition Claims.

 

48  See discussion above in this section, and see § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

49  11 U.S.C. § 1328(a) (emphasis added). See §§ 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502 and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

50  In re Sims, 288 B.R. 264, 269 (Bankr. M.D. Ala. 2003) (Confirmed plan can be modified to add postpetition medical service providers, but postpetition claim holders have option whether to file a proof of claim; debtor cannot use threats of disallowance or discharge to force postpetition claim holders to file proofs of claim, but postpetition claim holder can “elect not to file a claim under § 1305, waive participation in the instant plan, and seek to recover against the debtor after the Chapter 13 case is closed.”); In re Epstein, 200 B.R. 611 (Bankr. S.D. Ohio 1996) (Amendment of the schedules to list a postpetition claim holder does not satisfy § 1305. Debtor cannot file a claim for postpetition taxes on behalf of the IRS, and amending the schedules does not accomplish allowance of a postpetition claim.); In re Smith, 192 B.R. 712 (Bankr. E.D. Tenn. 1996) (Debtor does not allow or discharge postpetition claims by amending schedules after confirmation to list nine postpetition claim holders. Postpetition claims are not “provided for” by merely adding the creditors to the schedules and statements.).

 

51  See H.R. Rep. No. 95-595, at 427–28 (1977); S. Rep. No. 95-989, at 140 (1978).

 

52  11 U.S.C. § 1305(c). See, e.g., In re Sims, 288 B.R. 264 (Bankr. M.D. Ala. 2003) (Modification of confirmed plan to add postpetition medical services is allowed, but providers have option whether to file proofs of claim; prior approval of the trustee was not practicable.); In re Brooks, Nos. 95-81556, 95-82425, 95-81388, 2002 WL 31760206, at *2 (Bankr. C.D. Ill. Dec. 10, 2002) (unpublished) (With respect to postpetition utilities, even if plan could be modified to pay the postpetition utilities in full ahead of other unsecured claims, “those claims could not be allowed if [the utilities] knew or should have known that the Chapter 13 trustee’s approval was practicable and was not obtained.”); In re Trentham, 145 B.R. 564, 569 (Bankr. E.D. Tenn. 1992) (To accomplish allowance, “the debtor and/or prospective postpetition consumer creditor, if practicable, must obtain the trustee’s approval before the debt is incurred; . . . if prior approval is not obtained, the postpetition consumer creditor must establish that it did not know that prior approval by the trustee of the debtor’s incurring the obligation was practicable.”); In re Clayburn, 112 B.R. 434, 435 (Bankr. N.D. Ala. 1990) (Postpetition debt for insurance on the debtor’s car was a consumer debt necessary to the debtor’s performance under the plan, but neither the debtor nor the insurance company contacted the Chapter 13 trustee before the debt was incurred, and consent of the trustee was not impracticable. “[A] post-petition claim for a consumer debt for property or services necessary for the debtor’s performance under the plan shall be disallowed if the claimant should have known prior approval by the trustee was practicable and was not obtained.”).

 

53  See below in this section.

 

54  But see In re Bagby, 218 B.R. 878, 887 (Bankr. W.D. Tenn. 1998) (“Unlike pre-petition claims filed under section 501, claims filed under section 1305 are not deemed allowed. . . . .When proofs of claim are filed for post-petition consumer debts the trustee did not previously approve, the claims will not be allowed until the Court conducts a hearing. . . . At the hearing, the Court will require the debtor and creditor to demonstrate that the debt is one for property or services necessary for the debtor’s performance under the plan and that obtaining the prior approval of the trustee was not practicable. This Court will not assume that obtaining the prior approval of the trustee was not practicable.”).

 

55  See also 11 U.S.C. § 1305(b) (“except as provided in [§ 1305](c) . . . a claim filed under [§ 1305](a) . . . shall be allowed or disallowed under section 502 of this title.”

 

56  288 B.R. 264 (Bankr. M.D. Ala. 2003).

 

57  Modification of a Chapter 13 plan to “add” creditors is discussed in § 260.1 [ To “Add” Prepetition Creditors ] § 127.3  To “Add” Prepetition Creditors.

 

58  288 B.R. at 267–69. Accord In re Brooks, Nos. 95-81556, 95-82425, 95-81388, 2002 WL 31760206, at *2 (Bankr. C.D. Ill. Dec. 10, 2002) (unpublished) (A confirmed plan cannot be modified to require postpetition utilities to participate in the Chapter 13 plan. “[A] debtor may not force a post-petition creditor to file a proof claim and come under a confirmed plan. . . . Nor is a creditor required to file a proof of claim for a post-petition claim. . . . [U]nder § 1305 CILCO’s post-petition claims, if filed and allowed, would be entitled to be paid in accordance with the confirmed plans, 4% in BROOKS and 13% in SLAUGHTER.); In re Bagby, 218 B.R. 878, 889–90 (Bankr. W.D. Tenn. 1998) (“because a post-petition claimant always has the option of not filing a proof of claim and not participating in a Chapter 13 plan, the debtor who hopes to discharge a post-petition claim will want to provide for full repayment of post-petition claims.”); In re Trentham, 145 B.R. 564, 569 (Bankr. E.D. Tenn. 1992) (Debtor cannot use § 1329 to modify plan after confirmation to force postpetition consumer creditors to accept 8% payment. “Under no circumstances will the creditor be forced to file a proof of claim, and orders should not be submitted to the court which give a postpetition consumer creditor the impression that it must file a proof of claim.”); In re Goodman, 136 B.R. 167, 169 (Bankr. W.D. Tenn. 1992) (“Debtors may not ‘sidestep’ § 1305(a)’s requirements through post-confirmation modification under § 1329. . . . Post-petition creditors can decline to participate in the previously confirmed Chapter 13 plan by not filing a proof of claim, and the debtor cannot force or cram down such a creditor’s participation through post-confirmation modification.”).

 

59  Nos. 95-81556, 95-82425, 95-81388, 2002 WL 31760206 (Bankr. C.D. Ill. Dec. 10, 2002) (unpublished).

 

60  See § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination for discussion of the unfair discrimination test for classification of claims.

 

61  2002 WL 31760206, at *5.

 

62  See § 204.1 [ Providing for Postpetition Claims ] § 113.6  Providing for Postpetition Claims.

 

63  See § 355.1 [ Waiver of Discharge ] § 161.1  Waiver of Discharge for discussion of waiver of discharge.

 

64  See §§ 240.1 [ Representing a Postpetition Claim Holder ] § 123.4  Representing a Postpetition Claim Holder and 245.1 [ Postpetition Claims and Relief from the Stay ] § 124.5  Postpetition Claims and Relief from the Stay. See, e.g., In re Tomasevic, 275 B.R. 86, 99–100 (Bankr. M.D. Fla. 2001) (Postpetition attorney’s fees are postpetition debts that are not included in mortgage holder’s arrearage claim and are “outside the scope of the bankruptcy court’s jurisdiction”. “Subject only to the automatic stay, Washington Mutual may seek to recover its post-petition fees and costs directly from the debtor outside the protection of the bankruptcy court and pursuant to non-bankruptcy law to the extent the terms of the debt instruments permit.”); In re Wilkoff, No. 98-34354DWS, 2001 WL 91624 (Bankr. E.D. Pa. Jan. 24, 2001) (unpublished) (Claim for income taxes for 1998 is a § 1305 postpetition claim in a Chapter 13 case filed on November 6, 1998. Because the IRS did not file a proof of claim, the 1998 taxes are not allowable, cannot be provided for by the plan and are not dischargeable at the completion of payments. The IRS is entitled to postconfirmation relief from the stay to collect its 1998 taxes from the debtor or from property of the debtor.).

 

65  See §§ 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502 and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

66  See § 261.1 [ To Provide for Postpetition Claims ] § 127.4  To Provide for Postpetition Claims.

 

67  11 U.S.C. § 1305(a)(1).

 

68  See United States v. Chavis (In re Chavis), 47 F.3d 818, 819 n.4 (6th Cir. 1995) (In a footnote, income taxes for 1991 are nondischargeable, postpetition debts in a Chapter 13 case filed on May 23, 1991.); United States v. Ripley, 926 F.2d 440 (5th Cir. 1991) (Self-employment taxes “become payable” for purposes of allowance as postpetition claims under § 1305 when debtors are required to file their tax return, not when estimated tax installment payments are due. When debtors filed Chapter 13 case in November of 1987 and filed tax return in May of 1988, taxes due for 1987 were postpetition claims under § 1305. The IRS’s failure to file a proof of claim until after the filing of the tax return in 1988 was not fatal to the IRS claim because the IRS could and did file its claim pursuant to § 1305.); Shell Oil Co. v. Capital Fin. Servs., 170 B.R. 903 (S.D. Tex. 1994) (Assessments and liens for taxes and penalties for 1988 and 1989 are postpetition claims in a Chapter 13 case filed on February 11, 1988.); In re Seyden, 294 B.R. 418 (Bankr. S.D. Ga. 2002) (Taxes for 2001 are postpetition claims in a Chapter 13 case filed on December 6, 2001.); In re Wilkoff, No. 98-34354DWS, 2001 WL 91624 (Bankr. E.D. Pa. Jan. 24, 2001) (unpublished) (Claim for income taxes for 1998 is a § 1305 postpetition claim in a Chapter 13 case filed on November 6, 1998.); In re Epstein, 200 B.R. 611 (Bankr. S.D. Ohio 1996) (Income taxes for 1989 are a postpetition debt in a Chapter 13 case filed on September 6, 1989.); In re Reamy, 169 B.R. 352 (Bankr. D. Md. 1994) (Real estate taxes for 1994–95 do not constitute a lien against property of the debtor until July 1, 1994; therefore, the debt for real estate taxes for 1994–95 in a Chapter 13 case filed before July 1, 1994, would ordinarily be a postpetition claim.); In re Hudson, 158 B.R. 670 (Bankr. N.D. Ohio 1993) (Tax claims for 1985 and 1986 are postpetition claims where Chapter 7 case was filed on February 12, 1985, and converted to Chapter 13 on March 27, 1987.); Matravers v. United States (In re Matravers), 149 B.R. 204, 206 (Bankr. D. Utah 1993) (In a Chapter 13 case filed on December 13, 1984, personal tax liability for the tax year 1984 is a postpetition claim under § 1305(a)(1). “One line of cases fixes a tax claim based on when the income is earned on which the tax is applied. Under this theory, the status of a tax in bankruptcy is predicated upon the date the tax is incurred, not when assessed. . . . In contrast, another line of cases hold that the key triggering device is when a tax is due. . . . This Court believes that the language of the Bankruptcy Code mandates the second rule; the key event is when a tax is due. . . . Thus, a tax claim that becomes payable after the filing of a petition is a post-petition claim. . . . The debtors’ 1984 Personal Liability became payable when their 1984 tax return was due, on April 15, 1985. Therefore, the 1984 Personal Liability is a post-petition liability.”); In re Sorge, 149 B.R. 197 (Bankr. W.D. Okla. 1993) (In a Chapter 11 case filed in 1985 and converted to Chapter 13 in 1989, all taxes for 1985 and after are postpetition taxes.); In re Zook, 144 B.R. 489, 490 (Bankr. D. Idaho 1991) (Taxes that accrued both pre- and postpetition and that were payable on the date of the petition are postpetition claims under § 1305. Chapter 13 debtor is authorized by 11 U.S.C. § 501(c) and Bankruptcy Rule 3004 to file a claim on behalf of the state for the postpetition taxes. “The claim is for postpetition taxes, and is thus authorized as a postpetition claim for treatment in the debtor’s plan under Section 1305(a). [The state] does not dispute the amount of the claim, and shows no prejudice as a result of the debtors’ filing of the claim. The filing of a claim by a debtor for a taxing entity under 11 U.S.C. § 501(c) and F.R.B.P. 3004 is not specifically prohibited by any statute or rule.”); In re Martin, 130 B.R. 349 (Bankr. M.D. Fla. 1991) (Taxes for 1990 are postpetition claims in a Chapter 13 case filed on November 13, 1990. Only the IRS has the right to file a postpetition claim with respect to the 1990 taxes. Debtor cannot use Bankruptcy Rule 3004 to file a claim on behalf of the IRS for postpetition taxes. Plan cannot deal with 1990 taxes if IRS objects to claim filed by debtor for taxes not yet due and owing on the date of commencement of the Chapter 13 case.); In re Miller, 90 B.R. 317 (Bankr. E.D. Tenn. 1988), aff’d sub nom. United States v. Miller, 118 B.R. 76 (E.D. Tenn. 1989) (Court reserves question whether 100% penalty relating to corporate employment taxes for a quarter ending after the filing of the debtor’s personal Chapter 13 case are postpetition claims that might be allowable under § 1305(a)(1).); In re Ryan, 78 B.R. 175 (Bankr. E.D. Tenn. 1987) (1981 taxes are postpetition taxes under § 1305(a)(1) when the debtors file a Chapter 13 petition in September of 1981. Taxes for 1981 and subsequent years are not discharged because § 1305(a)(1) gives the IRS the choice of collecting under plan or not filing a proof of claim.). Compare United States v. Lee, 184 B.R. 257 (W.D. Va. 1995) (Section 6672 liability was a prepetition debt because the tax to which it related became due during a prepetition tax year. Claim for responsible person liability under § 6672 of the Tax Code is discharged without payment because IRS failed to timely file a claim.); In re Friesenhahn, 169 B.R. 615, 624–26 (Bankr. W.D. Tex. 1994) (Responsible person liability under 26 U.S.C. § 6672 is not a postpetition claim for purposes of § 1305(a)(1) where the taxes to which the responsible person liability attaches became due and payable before the petition. “The focus of section 1305(a)(1) is taxes that become payable to a governmental unit while the case is pending. The liability imposed under section 6672 is not a true ‘tax.’ . . . [T]he liability assessed thereunder [is] a penalty. . . . Liability under section 6672 is derivative always of the employer’s delinquent withholding taxes. Thus, while the claim against the debtors asserted by the IRS arises under section 6672, the tax from which the claim is derived does not. . . . Under [United States v. Ripley (In re Ripley), 926 F.2d 440 (5th Cir. 1991),] a tax becomes payable at the time the tax return is due to be filed. . . . Section 6672 of the IRC imposes no duty upon a responsible party to file a return under section 6672. The withholding taxes that allegedly were not remitted to the government in the instant case relate exclusively to periods for which tax returns were due prepetition. The tax which the IRS seeks to recover therefore became payable prepetition, when [the debtors’ corporation’s] quarterly payroll tax returns were due to be filed. The IRS’s claim under section 6672 did not become payable within the meaning of section 1305(a)(1).”). See also United States v. Hillsboro Holdings Corp., 116 F.3d 1391 (11th Cir. 1997) (In a Chapter 11 case filed before October 22, 1994, tax claims are allocated between the first priority in § 507(a)(1) for administrative expenses and the seventh priority in § 507(a)(7) based on whether the income to which the tax is attributable was earned before or after the Chapter 11 petition.); Dixon v. United States (In re Dixon), 218 B.R. 150, 151–53 (B.A.P. 10th Cir. 1998) (Tax claim for 1992 cannot be a § 1305(a)(1) claim in a Chapter 13 case filed on April 9, 1993. “Some courts have ruled that taxes ‘become payable’ under § 1305(a)(1) when the tax return is due under [26 U.S.C.] § 6151(a). . . . While it is not immediately apparent why in § 1305(a)(1) Congress said ‘become payable’ rather than ‘arise’ or ‘accrue’ or some other words that more obviously refer to a time before the last permissible day for paying taxes, we think it is clear the phrase would not fit comfortably in the overall chapter 13 scheme if it included any prepetition claims. From the Debtors’ standpoint, their 1992 tax liability essentially became fixed and calculable—and therefore payable—at the close of their tax year. One would not be stretching the meaning of § 1305(a)(1) to say those taxes ‘became payable’ at that time, that is, as of the day after their tax year ended.”).

 

69  In re Seyden, 294 B.R. 418, 419–20 (Bankr. S.D. Ga. 2002) (“Section 1305 grants the right to file post-petition claims only to claimholders . . . . Debtor has no standing to file her post-petition tax claim over the IRS objection. . . . Debtor’s claim, which arose post-petition and is not fileable as a post-petition claim under § 1305(a), may not be paid under Debtor’s confirmed Chapter 13 Plan.”); In re Wilkoff, No. 98-34354DWS, 2001 WL 91624, at *7 (Bankr. E.D. Pa. Jan. 24, 2001) (unpublished) (In a Chapter 13 case field in November of 1998, claim for income taxes for 1998 is a § 1305 postpetition claim; because the IRS did not file a proof of claim, the 1998 taxes are not allowable and cannot be provided for by the plan. “The option belongs exclusively to the holder of [a § 1305(a)(1)] claim; the debtor may not force the holder to file a proof of claim and may not file a proof of claim on the holder’s behalf. . . . [W]hen a holder chooses not to file a claim under § 1305(a), the claim is neither ‘allowed’ or ‘disallowed.’”); United States v. Beane (In re Beane), No. 1-96-03487, 2000 WL 33180213, at *1 (Bankr. M.D. Pa. Nov. 29, 2000) (unpublished) (“11 U.S.C. § 1305 provides that a tax creditor, unlike ordinary creditors, may file a proof of claim for a post-petition debt and have it paid through the Plan. The IRS asserts that Section 1305 does not allow a debtor to file said claim on the tax creditor’s behalf. I agree. When the IRS has a post-petition tax claim against a Chapter 13 estate, it ‘has a choice between voluntary participation in the . . . plan . . . or going directly against the debtor pursuant to applicable nonbankruptcy law.’ . . . A debtor cannot usurp or preclude this choice by filing a proof of claim on behalf of the IRS.”); In re Epstein, 200 B.R. 611 (Bankr. S.D. Ohio 1996) (Income taxes for 1989 are a postpetition debt in a Chapter 13 case filed on September 6, 1989. That the debtor amended plan after confirmation to provide for the payment of 1989 taxes does not accomplish discharge because IRS chose not to file a proof of claim. Debtor cannot file a claim for postpetition taxes on behalf of the IRS. Amendment of the schedules does not satisfy § 1305.); In re Hudson, 158 B.R. 670 (Bankr. N.D. Ohio 1993) (Debtor cannot compel IRS to file a proof of claim for postpetition taxes that accrued during a Chapter 7 case and prior to conversion to Chapter 13. Postpetition tax claim for which no proof of claim was filed is not entitled to payment under the plan.); In re Sorge, 149 B.R. 197, 203 (Bankr. W.D. Okla. 1993) (“[Section] 1322(b)(6) permits provision in a Chapter 13 plan only for those postpetition claims allowed under § 1305. Since a claim may not be allowed under § 502 unless a proof of the claim has been filed, a § 1305 claim as to which no claim has been filed may not be allowed.”); In re Martin, 130 B.R. 349 (Bankr. M.D. Fla. 1991) (Only the IRS has the right to file a postpetition claim with respect to taxes that became payable in the year in which the Chapter 13 petition was filed. Debtor cannot use Bankruptcy Rule 3004 to file a claim on behalf of the IRS for postpetition taxes.); In re Rothman, 76 B.R. 38 (Bankr. E.D.N.Y. 1987) (Option lies with taxing authority whether to file a claim under § 1305 with respect to postpetition taxes.); In re Dickey, 64 B.R. 3 (Bankr. E.D. Va. 1985) (Neither § 1305 nor § 501 permits a Chapter 13 debtor to file a proof of claim for postpetition taxes when the IRS chooses not to file a proof of claim.). But see In re Zook, 144 B.R. 489, 490 (Bankr. D. Idaho 1991) (Taxes that accrued both pre- and postpetition and that were payable on the date of the petition are postpetition claims under § 1305. Chapter 13 debtor is authorized by 11 U.S.C. § 501(c) and Bankruptcy Rule 3004 to file a claim on behalf of the state for the postpetition taxes. “The claim is for postpetition taxes, and is thus authorized as a postpetition claim for treatment in the debtor’s plan under Section 1305(a). [The state] does not dispute the amount of the claim, and shows no prejudice as a result of the debtors’ filing of the claim. The filing of a claim by a debtor for a taxing entity under 11 U.S.C. § 501(c) and F.R.B.P. 3004 is not specifically prohibited by any statute or rule.”).

 

70  In re Parffrey, 264 B.R. 409 (Bankr. S.D. Tex. 2001) (Postpetition claim for federal income taxes is not dischargeable because IRS did not file a § 1305 claim.); In re Wilkoff, No. 98-34354DWS, 2001 WL 91624, at *7 (Bankr. E.D. Pa. Jan. 24, 2001) (unpublished) (Claim for 1998 income taxes is a § 1305 postpetition claim in a Chapter 13 case filed in November of 1998; because IRS elected not to file a proof of claim, the 1998 taxes are not allowable, cannot be provided for by the plan and are not dischargeable at the completion of payments. “[I]f a claim for ‘taxes that become payable . . . while the case is pending’ is not filed and, therefore, not allowed pursuant to § 502, it cannot be provided for in a Chapter 13 plan. . . . [O]nly debts that ‘have been provided for by’ a Chapter 13 plan or ‘disallowed under section 502’ are discharged under § 1328(a). . . . Consequently, when a holder chooses not to file a claim under § 1305(a), the claim is not discharged.”); In re Hudson, 158 B.R. 670, 673–74 (Bankr. N.D. Ohio 1993) (Tax claims for 1985 and 1986 are postpetition claims where Chapter 7 case was filed on February 12, 1985, and converted to Chapter 13 on March 27, 1987. Discharge entered in the subsequent Chapter 13 case did not discharge the debtors’ liability for 1985 and 1986 taxes. “The IRS was not required to file Proofs of Claim for the 1985 and 1986 taxes. Had it chosen to file, the debts would have been considered prepetition, but in the absence of such action, the 1985 and 1986 tax obligations must be considered postpetition claims. . . . [N]o action was required on the part of the IRS in order to preserve their 1985 and 1986 tax claims. . . . Even if the Debtors had wanted to include the 1985 and 1986 tax years in their plan, they would not have been able to do so without the cooperation of the IRS. . . . [T]he debtor ‘[cannot] compel the government to accept payment under the plan (file a proof of claim) or have the debt discharged without payment. The government could choose to collect from the debtor after discharge.’”); Matravers v. United States (In re Matravers), 149 B.R. 204 (Bankr. D. Utah 1993) (In a Chapter 13 case filed on December 3, 1984, personal tax liability for the tax year 1984 is a postpetition claim under § 1305(a)(1). The IRS’s failure to file a proof of claim precludes payment of the postpetition tax liability through the plan. The tax claim for 1984 will survive discharge, but the IRS must wait until the case is closed to collect.); In re Sorge, 149 B.R. 197, 203 (Bankr. W.D. Okla. 1993) (In a Chapter 11 case filed in 1985 and converted to Chapter 13 in 1989, all taxes for 1985 and after are postpetition taxes that are not discharged because the IRS did not file a proof of claim with respect to taxes for 1985 and after. “[Section] 1322(b)(6) permits provision in a Chapter 13 plan only for those postpetition claims allowed under § 1305. Since a claim may not be allowed under § 502 unless a proof of the claim has been filed, a § 1305 claim as to which no claim has been filed may not be allowed and, under § 1322(b)(6), may not be provided for by the Chapter 13 plan or, under § 1328(a), discharged at the completion of payments under the plan.”). See In re Ryan, 78 B.R. 175 (Bankr. E.D. Tenn. 1987) (Postpetition taxes under § 1305(a)(1) are not discharged because § 1305(a)(1) gives the IRS the choice of collecting under the plan or of not filing a proof of claim and collecting from the debtor.); In re Rothman, 76 B.R. 38 (Bankr. E.D.N.Y. 1987) (If taxing authority declines to file proof of claim, postpetition taxes are not discharged and may be collected from the debtor after Chapter 13 case is completed.); In re Gyulafia, 65 B.R. 913 (Bankr. D. Kan. 1986) (Because of the special provision for postpetition taxes in § 1305(a)(1), postpetition taxes are not administrative expenses under § 503(b). IRS has a choice of filing a claim under § 1305 or seeking relief from the stay.); In re Wright, 66 B.R. 125 (Bankr. D. Kan. 1984).

 

71  See § 132.9  Postpetition Claims, § 134.1  Timing, Form, Superseding and Amended Claims before 2005§ 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004§ 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

72  11 U.S.C. § 502(i).

 

73  11 U.S.C. § 502(a). See § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption.

 

74  11 U.S.C. § 501(c). See § 134.1  Timing, Form, Superseding and Amended Claims before 2005§ 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004 and § 134.3  Strategic Considerations: When to File Claims for Creditors.

 

75  11 U.S.C. § 507(a)(8)(C).

 

76  11 U.S.C. § 101(10)(A).

 

77  11 U.S.C. § 501(d).

 

78  11 U.S.C. § 1305(a). See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

79  11 U.S.C. § 1305(b). See § 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

80  270 B.R. 203 (Bankr. S.D. Tex. 2001).

 

81  See § 134.1  Timing, Form, Superseding and Amended Claims before 2005 and § 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004.

 

82  270 B.R. at 206–09. Compare In re Seyden, 294 B.R. 418, 419–20 (Bankr. S.D. Ga. 2002) (Taxes for 2001 are postpetition claims in a Chapter 13 case filed on December 6, 2001; only the taxing authority can file a proof of claim for postpetition taxes under § 1305, and § 502(i) is triggered only after the postpetition claim holder files a proof of claim. “Because Section 1305 grants the right to file post-petition claims only to claimholders, not to Chapter 13 debtors, Debtor has no standing to file her post-petition tax claim over the IRS objection. . . . Because subsection (b) of § 1305 expressly states that § 502 applies to claims filed in accordance with subsection (a) of § 1305, which qualifiedly permits Chapter 13 claimholders—not debtors—to file post-petition claims, there is no indication that the drafters intended debtors to have the option of filing such claims. Therefore, Debtor’s claim, which arose post-petition and is not fileable as a post-petition claim under § 1305(a), may not be paid under Debtor’s confirmed Chapter 13 Plan.”).

 

83  11 U.S.C. § 502(i). Property taxes “assessed” before the petition that “arise” after commencement of a Chapter 13 case would also fit this example. See 11 U.S.C. § 507(a)(8)(B) also discussed in § 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

84  See also § 132.9  Postpetition Claims, § 134.1  Timing, Form, Superseding and Amended Claims before 2005§ 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004, § 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

85  See White Plains v. A & S Galleria Real Estate (In re Federated Dep’t Stores, Inc.), 270 F.3d 994, 1006 n.8 (6th Cir. 2001).

 

86  In re Gyulafia, 65 B.R. 913 (Bankr. D. Kan. 1986) (Section 503 administrative expense status is not available to postpetition tax claims in a Chapter 13 case whether taxes are incurred before or after confirmation.); In re Walker, 66 B.R. 125 (Bankr. D. Kan. 1984) (Taxes incurred during pendency of Chapter 13 case are not entitled to administrative priority under § 503 but to the same treatment as if such claim had arisen before the date of the filing consistent with § 1305(b).).

 

87  11 U.S.C. § 503(b)(1)(B), (C).

 

88  11 U.S.C. § 346(d).

 

89  See above in this section.

 

90  86 B.R. 17 (Bankr. D. Conn. 1988).

 

91  Compare In re Rainey, 257 B.R. 792, 795 (Bankr. W.D. Va. 2001) (At conversion from Chapter 13 to Chapter 7, responsible person liability for sales and use taxes incurred by the debtor’s corporation during the Chapter 13 case are not administrative expenses under § 503(b)(1)(B) because the taxes were not incurred “by the estate.” “[Section] 503(b)(1)(B) . . . sets forth a second requirement for taxes to be administrative expenses—that not only must the tax be incurred postpetition, but it must also be incurred ‘by the estate’ itself, and not a corporation owned by a debtor or a debtor himself. . . . [A]t the time the sales and use taxes were incurred the corporation was a separate legal entity and as such would not have ever been and is not now part of the bankruptcy estate. Any sales or use tax incurred in the operation of the corporation does not become tax incurred in the administration of the Debtor’s individual bankruptcy estate by virtue of the Debtor’s personal liability for that tax.” Applying § 348(d), the debtor’s personal liability for sales and use taxes incurred by the corporation during the Chapter 13 case is eighth priority under § 507(a)(8)(C).).

 

92  This holding equates expenses and claims for § 1322(a)(2) purposes. See § 73.2  What Claims Are Priority Claims?, § 73.3  Priority Claims Added or Changed by BAPCPA, § 73.5  Interest Not Required, with Exceptions, § 73.6  Treatment of Priority Claims Changed by BAPCPA, § 136.2  Taxes before BAPCPA§ 136.3  Taxes after BAPCPA, § 136.16  Postpetition Interest on Priority Claims before BAPCPA and § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

93  See §§ 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502 and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

94  See § 314.1 [ On Postpetition Claims ] § 142.5  On Postpetition Claims.

 

95  11 U.S.C. § 726(b).

 

96  See, e.g., In re Rainey, 257 B.R. 792 (Bankr. W.D. Va. 2001) (At conversion from Chapter 13 to Chapter 7, responsible person liability for sales and use taxes incurred by the debtor’s corporation during the Chapter 13 case is not administrative expense under § 503(b)(1)(B) because the taxes were not incurred “by the estate.” Applying § 348(d), the debtor’s personal liability for sales and use taxes incurred by the corporation during the Chapter 13 case is eighth priority under § 507(a)(8)(C).).

 

97  11 U.S.C. § 727(b) discharges “debts that arose before the date of the order for relief.” At conversion from Chapter 13 to Chapter 7, § 348(b) defines the order for relief for discharge purposes as the date of conversion. See § 314.1 [ On Postpetition Claims ] § 142.5  On Postpetition Claims.

 

98  See § 142.5  On Postpetition Claims, § 143.1  In Cases Filed before October 22, 1994§ 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA and § 153.1  In General.

 

99  See § 153.1  In General and § 153.2  Consequences of Dismissal Added or Changed by BAPCPA. See, e.g., Beam v. IRS (In re Beam), 192 F.3d 941 (9th Cir. 1999) (IRS levy captures $24,000 held by trustee at dismissal of an unconfirmed Chapter 13 case. Chapter 13 case filed in January of 1993 was denied confirmation in June of 1997. Over the intervening four years, the debtors deposited with the trustee $24,000 toward the proposed plan. After confirmation was denied, debtors moved to dismiss. IRS served a notice of levy on the Chapter 13 trustee. “Congress clearly intended to exclude from IRS levy only those 13 categories of property specifically-exempted in [26 U.S.C.] § 6334(a). . . . Section 1326(a)(2) of the Bankruptcy Code is not listed among the 13 items exempt from levy under § 6334(a). . . . Because a trustee in bankruptcy represents the bankruptcy estate, see 11 U.S.C. § 323, the trustee is therefore obligated to the estate. Accordingly, service of a notice of levy upon the trustee in bankruptcy for any obligations owed by the estate is proper.”); In re Doherty, 229 B.R. 461, 463–67 (Bankr. E.D. Wash. 1999) (At dismissal before confirmation, levy on Chapter 13 trustee by state of Washington to collect prepetition taxes is effective; after deduction of $516 for administrative expenses, trustee must remit balance of $9,330 to Department of Revenue. “Section 349(b)(3) provides that upon dismissal property of the estate revests in the entity which held the property prior to commencement of the case. . . . The disposition of post-petition funds received by the Chapter 13 Trustee is addressed in 11 U.S.C. § 1326(a)(2). This section directs that post-petition payments be returned to the debtor if the case is dismissed prior to confirmation. . . . While it is clear that the funds at issue in this case revest in the Debtors upon dismissal, the Chapter 13 Trustee must complete his administration of the case before the funds can be returned to the Debtors. . . . The Court cannot permit the State’s levy to interfere with the accomplishment of the Trustee’s duties to determine and pay costs of administration. Those statutory duties are preemptive both under the Supremacy Clause of the United States Constitution and the doctrine of Custodia Legis. . . . The automatic stay provision of § 362 . . . terminate[s] upon the dismissal of the case. . . . [Section] 1326(a)(2) does not clearly extend those protections. . . . [T]he Trustee is authorized and entitled to deduct from the funds held the sum of $516.00 for administrative expenses. After deduction of this amount, the remaining funds are subject to the Department of Revenue’s Notice and Order to Withhold and Deliver.”).

 

100  See § 132.3  Governmental Units, § 132.9  Postpetition Claims, § 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

101  See Dixon v. United States (In re Dixon), 218 B.R. 150, 151–53 (B.A.P. 10th Cir. 1998) (Tax claim for 1992 cannot be a § 1305(a)(1) claim in a Chapter 13 case filed on April 9, 1993, thus IRS’s failure to file a proof of claim is fatal of discharge. “Oddly enough, the IRS concedes its claim arose at the end of the Debtors’ 1992 tax year, and so could have been subject to chapter 13 treatment as a prepetition claim. However, in effect it contends it was also free to avoid having its claim treated as a prepetition claim by failing to file a proof of claim. . . . Some courts have ruled that taxes ‘become payable’ under § 1305(a)(1) when the tax return is due under [26 U.S.C.] § 6151(a). . . . While it is not immediately apparent why in § 1305(a)(1) Congress said ‘become payable’ rather than ‘arise’ or ‘accrue’ or some other words that more obviously refer to a time before the last permissible day for paying taxes, we think it is clear the phrase would not fit comfortably in the overall chapter 13 scheme if it included any prepetition claims. From the Debtors’ standpoint, their 1992 tax liability essentially became fixed and calculable—and therefore payable—at the close of their tax year. One would not be stretching the meaning of § 1305(a)(1) to say those taxes ‘became payable’ at that time, that is, as of the day after their tax year ended. . . . In sum, the IRS’s argument here is that the Debtors’ 1992 taxes are a prepetition claim that it could have forced the Debtors to pay in full through their chapter 13 plan by choosing to file a proof of claim, but that § 1305(a)(1) allowed it to choose again either: (1) to wait until the Debtors’ tax return came due and force them to pay the claim in full by filing a proof of claim at that time; or (2) to wait even longer, until the Debtors’ bankruptcy case was closed, and try to collect the claim from them then. We find this to be a strange system for Congress to have intended to establish. . . . [W]e are convinced § 1305 itself contains clues that demonstrate that Congress did not intend to include prepetition claims within the statute’s reach. . . . We concluded the IRS’s claim for 1992 taxes is not covered by § 1305(a)(1).”); United States v. Lee, 184 B.R. 257 (W.D. Va. 1995) (Claim for responsible person liability under § 6672 of the Tax Code is discharged without payment where the IRS had notice of the Chapter 13 case, the IRS timely filed a claim for personal income taxes, but the IRS failed to timely file a claim for the § 6672 taxes. Debtors filed Chapter 13 in 1988. The IRS apparently did not discover its § 6672 claim for 1984 and 1986 until after the bar date. The § 6672 liability was a prepetition debt because the tax to which it related became due during a prepetition tax year. Upon completion of payments to other creditors, the § 6672 claim was discharged without payment.); In re Sapienza, 27 B.R. 526 (Bankr. W.D.N.Y. 1983); In re Phillips, 27 B.R. 94 (Bankr. E.D. Va. 1983).

 

102  See United States v. Ripley, 926 F.2d 440 (5th Cir. 1991) (When debtors file Chapter 13 case in November of 1987 and file tax return in May of 1988, taxes due are postpetition claims under § 1305. The IRS’s failure to file a proof of claim until after the filing of the tax return in 1988 is not fatal to the IRS claim because the IRS could and did file its claim pursuant to § 1305.). See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

103  See above in this section.

 

104  11 U.S.C. § 1305(b).

 

105  169 B.R. 352 (Bankr. D. Md. 1994).

 

106  169 B.R. at 354.

 

107  217 B.R. 623 (Bankr. S.D. Cal. 1998).

 

108  217 B.R. at 625–26. Accord In re Bryant, No. 94-13471-SSM, 1998 WL 412632 (Bankr. E.D. Va. Apr. 24, 1998).

 

109  236 B.R. 616 (Bankr. E.D. Tex. 1999).

 

110  236 B.R. at 619–20 & n.3.

 

111  11 U.S.C. § 1305(b).

 

112  See above in this section, and see § 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

113  11 U.S.C. § 502(i).

 

114  11 U.S.C. § 1305(a)(1), (b).

 

115  11 U.S.C. § 362(b)(18), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 401, 108 Stat. 4106 (1994).

 

116  See also § 58.4  Postpetition Creditors, § 136.2  Taxes before BAPCPA§ 136.3  Taxes after BAPCPA, § 136.18  Secured Priority Claims before BAPCPA and § 136.19  Secured Priority Claims after BAPCPA.

 

117  11 U.S.C. § 101(8). The same term of art appears in the codebtor stay of § 1301(a). See § 85.1 [ Consumer Debts Only ] § 65.2  Consumer Debts Only.

 

118  In re Roseboro, 77 B.R. 38 (Bankr. W.D.N.C. 1987).

 

119  In re Sims, 288 B.R. 264, 267 (Bankr. M.D. Ala. 2003) (“[T]he medical bills at issue in the instant case are within the purview of Section 1305(a). . . . [T]he expenses were incurred during the pendency of the case for necessary medical services provided to Mrs. Sims. The treatment was essential to Mrs. Sims’ ability to perform under the plan. . . . [T]he medical treatment provided was immediately necessary and prior approval of the Trustee was not practicable.”); In re Goodman, 136 B.R. 167 (Bankr. W.D. Tenn. 1992); In re Farquhar, 112 B.R. 34 (Bankr. D. Colo. 1989); In re Pritchett, 55 B.R. 557 (Bankr. W.D. Va. 1985); In re Nelson, 27 B.R. 341 (Bankr. M.D. Ga. 1983).

 

120  See In re Bagby, 218 B.R. 878 (Bankr. W.D. Tenn. 1998) (Claims for check-cashing services incurred postpetition are allowable under § 1305. Debtors used “deferred presentment service providers” to obtain cash advances in exchange for personal checks after filing Chapter 13 petitions. Debtors testified that they used the cash advances for rent and utilities. Cash advances in exchange for deferred presentment of a debtor’s check constitutes a debt for § 1305 purposes because the check-cashing services asserted “rights to payment.” Use of funds for rent and utilities was evidence that debts were for property or services necessary for the debtors’ performance under the plans. Claims were allowable notwithstanding the absence of prior approval by the Chapter 13 trustee because debtors did not consider the advances to be loans and check-cashing services did not fully explain the nature of the transactions. Postconfirmation motions to modify plans to provide separate classifications and full payment of the postpetition check-cashing services claims are denied because the notices given by the debtors were insufficient under Bankruptcy Rule 3015(g).).

 

121  In re Farquhar, 112 B.R. 34 (Bankr. D. Colo. 1989).

 

122  In re Clayburn, 112 B.R. 434 (Bankr. N.D. Ala. 1990).

 

123  RTO Rents v. Benson (In re Benson), 116 B.R. 606 (Bankr. S.D. Ohio 1990).

 

124  225 B.R. 600 (Bankr. D.S.C. 1997).

 

125  The 1994 amendments to § 503(a) were effective on October 22, 1994. The Chapter 13 petition in In re Wilder, 225 B.R. 600 (Bankr. D.S.C. 1997), was filed on September 12, 1994.

 

126  225 B.R. at 602.

 

127  225 B.R. at 603 (quoting 11 U.S.C. § 1305(c)).

 

128  225 B.R. at 603.

 

129  See also § 73.5  Interest Not Required, with Exceptions§ 73.6  Treatment of Priority Claims Changed by BAPCPA, § 136.16  Postpetition Interest on Priority Claims before BAPCPA and § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

130  In re Venable, 48 B.R. 853 (S.D.N.Y. 1985).

 

131  See above in this section and see § 142.5  On Postpetition Claims§ 153.1  In General and § 153.2  Consequences of Dismissal Added or Changed by BAPCPA.

 

132  See §§ 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination and 158.7 [ Postpetition Claims ] § 89.8  Postpetition Claims. See, e.g.,In re Brooks, Nos. 95-81556, 95-82425, 95-81388, 2002 WL 31760206 (Bankr. C.D. Ill. Dec. 10, 2002) (unpublished) (Modification after confirmation to pay postpetition utilities in full ahead of other unsecured claims violates unfair discrimination prohibition in § 1322(b).).

 

133  See In re Hanson, 223 B.R. 775, 780 (Bankr. D. Or. 1998) (Postconfirmation attorney fees are administrative expenses under §§ 507, 503 and 330 and thus are priority claims payable in full through the Chapter 13 plan and are not § 1305 postpetition claims notwithstanding contract with debtor’s attorney that allowed billing and payment for fees that were not paid through the Chapter 13 plan. “The postconfirmation fees and costs of debtor’s counsel related to the Chapter 13 case are administrative expenses, a specific category of postpetition debts distinct from the more general types of consumer debts covered by section 1305(a)(2). Under the rule of statutory construction that specific provisions control over general ones, we conclude that section 1305 does not apply to postconfirmation fees of Chapter 13 debtors’ counsel.”); In re Phillips, 219 B.R. 1001, 1007–09 (Bankr. W.D. Tenn. 1998) (The filing of postpetition claims under § 1305(a)(2) is not the proper procedure for an attorney to recover fees and expenses for services to a Chapter 13 debtor after confirmation. Debtor’s attorney charged Chapter 13 clients an initial fee to obtain confirmation and then billed clients at an hourly rate for additional work after confirmation. Counsel would file postpetition claims pursuant to § 1305(a)(2) for legal services after confirmation. Counsel did not have prior approval from the Chapter 13 trustee as required by § 1305(a)(2) and failed to demonstrate that trustee’s prior approval was not practicable. “Based on the intent of Congress, as evidenced in the legislative history, . . . § 1305 contemplates exigent circumstances under which prior approval is clearly not practicable. Contrary to Mr. Cohn’s argument, there is no indication that Congress intended routine legal work by a debtor’s attorney to be within the purview of § 1305. . . . The more appropriate procedure for approval of postpetition attorney’s fees and reimbursement of expenses . . . is an application for the court’s approval of attorney’s fees and expenses pursuant to § 330.” Court notes that § 1305 provides no meaningful notice of postpetition claims to debtor’s attorneys or others interested in reviewing the allowance of postpetition fees. A postpetition claim under § 1305 does not satisfy the “lodestar” requirements for consideration of an attorney’s application for fees. Administrative orders allowing postpetition attorney fees under § 1305 were vacated and debtor’s counsel allowed to file appropriate applications under § 330.).

 

134  11 U.S.C. § 1304(a). See § 12.1  Self-Employment, § 33.1  Special Information Needs In Business Cases, § 52.1  Operating a Chapter 13 Debtor Engaged in Business, § 52.2  Additional Filing and Reporting Requirements, § 52.3  Debtors Engaged in Business after BAPCPA, § 89.4  Suppliers or Other Business-Related Creditors and § 113.9  Special Drafting Considerations for Debtor Engaged in Business.

 

135  11 U.S.C. § 1305(a)(2).

 

136  The House version of the legislation that became the Bankruptcy Reform Act of 1978 contained a § 1305 that permitted a proof of claim to be filed by any entity that “holds a claim against the debtor—(1) for taxes that become payable to a governmental unit while the case is pending; or (2) [that] arises after the date of the order for relief under this chapter for property or services necessary for the debtor’s performance under the plan.” H.R. 8200, 95th Cong. (1977). The senate bill similarly did not contain any limitation on the kinds of debts that were allowable as postpetition claims if incurred for property or services necessary for the debtor’s performance under the plan. See S. 2266, 95th Cong. (1978). The compromise bill that ultimately became the Bankruptcy Reform Act of 1978 was different from both H.R. 8200 and S. 2266 with respect to the kinds of postpetition debts that could qualify as postpetition claims under § 1305. The joint explanatory statement with respect to the compromise states as follows:

        Section 1305(a)(2) of the House amendment modifies similar provisions contained in the House and Senate bills by restricting application of the paragraph to a consumer debt. Debts of the debtor that are not consumer debts should not be subjected to section 1305(c) or section 1328(d) of the House amendment. FN 124 Cong. Rec. H 11,106 (daily ed. Sept. 28, 1978) (remarks of Rep. Edwards), S 17,423 (daily ed. Oct. 6, 1978) (remarks of Sen. DeConcini).

 

137  See § 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate.

 

138  Security Bank of Marshalltown v. Neiman, 1 F.3d 687 (8th Cir. 1993).

 

139  Kwik-Kopy Corp. v. Klein (In re Klein), 218 B.R. 787, 794–95 (Bankr. W.D. Pa. 1998) (Royalties payable upon the debtor’s postpetition rejection of a franchise agreement are administrative expenses because the plan will be funded from the debtor’s operation of a copy center and a noncompete clause together with the royalty requirement were triggered by the debtor’s postpetition rejection of the franchise agreement. “[T]he royalties payable during the two-year covenant period are administrative claims. . . . Only when Debtor rejected the contract and ceased operating under the franchise agreement did the covenant take effect . . . . [T]he effect of the covenant was not operative until rejection, which occurred postpetition. The obligation to pay royalties for breach of the covenant is a postpetition actual and necessary expense to preserve the estate. 11 U.S.C. § 503(b)(1)(A). Thus, it is an administrative claim which must be paid in full through the plan. 11 U.S.C. § 1322(a)(2).”).

 

140  In re Lewis, 33 B.R. 98 (Bankr. W.D.N.Y. 1983).

 

141  See § 138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges for a discussion of late charges, attorneys’ fees, costs and other charges as elements of curing a home mortgage default through a Chapter 13 plan.

 

142  See § 131.1 [ Postpetition Defaults ] § 82.2  Postpetition Defaults for information regarding curing postpetition default; see § 259.1 [ To Cure Postconfirmation Default ] § 127.2  To Cure Postconfirmation Default for discussion of modification of a confirmed plan to cure postconfirmation default.