Chapter 13 for Tax Debt, Child Support & Alimony in Virginia
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Managing Tax and Support Arrears Through Chapter 13
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Chapter 13 for tax debt can be one of the most effective ways to get control of IRS, Virginia, or local tax obligations that you cannot afford to pay all at once. Chapter 13 can also provide a structured way to catch up on past-due child support or alimony while dealing with your other debts through a single court-supervised repayment plan.
These debts are different from ordinary credit cards or medical bills. Recent tax debts, child support, and alimony often cannot simply be discharged, but Chapter 13 can give you time to address them while protecting you from many other collection pressures. A Chapter 13 plan generally lasts three to five years and gives priority treatment to certain tax and domestic-support claims.
Can Chapter 13 Stop IRS or Virginia Tax Collection?
Yes. Filing Chapter 13 ordinarily triggers the automatic stay and stops most active collection efforts for pre-bankruptcy tax debts, just as it stops most other creditor collection.
That can include many levies, garnishments, lawsuits, and other collection efforts while the bankruptcy case is pending. Tax authorities do have some special rights and certain tax-related activity is excepted from the automatic stay, but the typical debtor receives significant protection from active tax collection after filing.
Instead of trying to satisfy a large tax balance immediately, the debtor can propose a Chapter 13 plan that provides the treatment required by bankruptcy law.
How Is Tax Debt Paid in Chapter 13?
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Not every tax debt is treated the same way.
Priority tax debts generally must be paid in full through the Chapter 13 plan. These commonly include relatively recent income-tax obligations and certain other taxes given priority status under the Bankruptcy Code.
Older tax obligations that are not entitled to priority may sometimes be treated like other unsecured debts. Depending on the circumstances, that can mean the debtor pays only the percentage required under the Chapter 13 plan, with the remaining qualifying balance discharged when the case is successfully completed.
A tax authority may also have a secured claim if it has properly perfected a tax lien. Secured tax claims can require different treatment from ordinary unsecured tax debt, so we review both the underlying tax obligation and any existing liens before determining how the debt should be handled.
Can Old Income Taxes Be Discharged in Bankruptcy?
Yes, some older income-tax debts can be discharged, but the rules are technical.
People sometimes refer to the “three-year, two-year, and 240-day rules.” Among other requirements, the due date of the return, when the return was actually filed, and when the tax was assessed can affect dischargeability. Fraudulent returns and willful attempts to evade taxes create additional problems, and events such as a prior bankruptcy or offer in compromise can change the applicable timing.
For that reason, the age of the tax year by itself does not tell us whether the debt can be discharged.
We review the tax years involved, filing dates, assessment dates, IRS or state records, and any prior collection history before determining how a particular tax debt should be treated.
What If You Have Not Filed All of Your Tax Returns?
Unfiled returns need to be addressed promptly.
In a Chapter 13 case, the debtor is generally required to file all required tax returns for taxable periods ending during the four-year period preceding the bankruptcy filing no later than the day before the first scheduled meeting of creditors, subject to limited statutory procedures for additional time. Failure to satisfy the tax-return requirements can prevent the case from moving forward.
If you are behind on filing tax returns, that does not necessarily mean you cannot file Chapter 13, but tell us which years are missing at the beginning of the process so we can determine what needs to be done.
Child Support and Alimony
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Chapter 13 can provide a structured way to catch up on past-due child support or alimony while you continue making the ongoing support payments that come due after filing. Because these obligations generally are not dischargeable, the goal is to use the Chapter 13 plan to bring the arrears current over time rather than trying to eliminate them.
If your support is being administered through the Virginia Division of Child Support Enforcement or another agency, we can work with the agency and address its claim through the bankruptcy case.
Child Support and Alimony in Chapter 13
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Chapter 13 can also be extremely useful when someone is behind on child support or alimony.
Past-due child support and qualifying alimony are considered domestic support obligations under the Bankruptcy Code. These claims receive the highest unsecured priority and generally are not discharged simply because a bankruptcy case was filed.
Chapter 13 nevertheless provides an important benefit: it can allow the debtor to address support arrears through a structured repayment plan rather than having to cure a substantial delinquency all at once.
When support is being administered by the Virginia Department of Social Services’ Division of Child Support Enforcement or another governmental agency, we work with the agency and address its claim as part of the Chapter 13 process.
Do Child Support and Alimony Payments Stop During Bankruptcy?
No. You must continue paying ongoing child support and alimony that comes due after the Chapter 13 case is filed.
Bankruptcy also does not shut down the family court system. The Bankruptcy Code contains significant exceptions to the automatic stay for domestic-support matters, including establishment or modification of support, certain income withholding, and collection of support from property that is not protected by the bankruptcy stay.
Chapter 13 is therefore a tool for catching up on arrears, not a way to stop current support obligations.
What Happens If You Fall Behind on Support During Chapter 13?
Staying current after filing is critical.
Failure to pay a domestic support obligation that first becomes due after the Chapter 13 filing can be grounds for dismissal or conversion of the bankruptcy case. And before receiving a Chapter 13 discharge, a debtor with domestic support obligations generally must certify that the required support payments that came due have been paid.
Someone entering Chapter 13 with support arrears therefore needs a budget that allows both the ongoing monthly support payment and the required Chapter 13 plan payment.
Can Bankruptcy Eliminate Child Support or Alimony?
Ordinarily, no.
Child support and qualifying alimony or maintenance obligations are specifically excepted from bankruptcy discharge. If the obligation qualifies as a domestic support obligation, it generally remains enforceable until it is paid.
Not every debt arising from a divorce or separation is necessarily a domestic support obligation, however. Property-division obligations and other divorce-related debts can be treated differently under bankruptcy law. If you owe money to a former spouse under a divorce decree or property-settlement agreement, we need to review the actual order or agreement rather than assuming every obligation is “alimony.”
Why Chapter 13 Can Work Well for Tax and Support Debt
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Tax arrears and support arrears can create a difficult situation because they often survive a Chapter 7 discharge and may be backed by aggressive collection remedies.
Chapter 13 can be especially useful because it gives the debtor a court-supervised structure for dealing with debts that have to be paid while also addressing other financial problems.
For example, a Chapter 13 debtor may be able to:
- pay priority tax debt over the life of the plan;
- address past-due child support or alimony;
- stop most ordinary creditor collection;
- catch up on mortgage arrears;
- protect a vehicle;
- eliminate or substantially reduce qualifying unsecured debts; and
- finish the case with the nondischargeable debts brought under control.
The goal is not simply to move debt around. It is to create a payment structure the debtor can actually maintain.
Chapter 7 vs. Chapter 13 for Taxes and Support
Chapter 7 and Chapter 13 treat these debts differently.
Chapter 7 may discharge certain qualifying older income-tax debts, but recent nondischargeable taxes generally remain due after the case. Chapter 7 also does not discharge child support or alimony and does not provide a three-to-five-year repayment plan for catching up on those obligations.
Chapter 13 is usually much more useful when the debtor has nondischargeable tax or support arrears that need to be paid over time.
The right chapter depends on what portion of the tax debt is dischargeable, whether tax liens exist, the amount of support arrears, the debtor’s income, and the debtor’s other financial problems.
What Should You Bring to a Consultation?
If taxes are part of the problem, it is helpful to provide:
- recent IRS or Virginia tax notices;
- a list of the tax years you believe are owed;
- copies of recently filed tax returns;
- IRS account transcripts if you already have them;
- notices of tax liens, levies, or garnishments; and
- information about any installment agreement or offer in compromise.
If child support or alimony is involved, provide:
- the current support order;
- any arrearage statement;
- notices from child support enforcement;
- wage-withholding information; and
- any recent court orders modifying the obligation.
We can usually determine much more once we know what is owed, for which periods, and what collection action is currently occurring.
Talk to a Richmond Bankruptcy Attorney About Tax or Support Arrears
If you are considering Chapter 13 for tax debt, child support arrears, or alimony, bankruptcy may provide a practical way to get these obligations under control while dealing with your other debts at the same time.
Kane & Papa represents individuals throughout the Richmond area in Chapter 7 and Chapter 13 bankruptcy cases. If the IRS, Virginia Department of Taxation, a local taxing authority, or child support enforcement is pursuing you for past-due obligations, contact us so we can review the debts and determine how they would be treated in bankruptcy.
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Take the first step toward debt relief today. Our compassionate and experienced bankruptcy attorneys are ready to discuss your unique situation and help you understand your options, whether it’s Chapter 7 or Chapter 13 bankruptcy. Fill out the form or call us directly to schedule your confidential consultation. Let Kane & Papa help you regain control of your finances to build a brighter future.