By: Clayton J. Lewis
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
In the case of In re Brown, the Bankruptcy Court for the Middle District of Florida held that a tax debt owed to the IRS was excepted from a hardship discharge, and accordingly was not excused from payment. The debtors in In re Brown filed for Chapter 13 bankruptcy relief and initially implemented a payment plan for 100% of their debts, including a total of $303,229 payable to the IRS. The debtors, however, were unable to meet their payment obligations and had to amend their payment plan twice. With over $155,000 still due to the IRS, the debtors offered to settle theirs debt with the IRS. The debtors and the IRS were unable to reach a settlement. The IRS nonetheless suggested that the debtors file for a hardship discharge under section 1328(b) of the Bankruptcy Code. The debtors followed this suggestion and received a hardship discharge, and their bankruptcy case was closed. The discharge order expressly noted that the debt to the IRS, however, was not discharged and was still due in full. When the IRS attempted to collect the debt, the debtors filed a complaint against the IRS in the bankruptcy court, alleging that the IRS had violated the Discharge Order.