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Ask Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA – Do I have to pay for Interest on IRS Tax Debt Paid through Chapter 13 Bankruptcy Plan?

If the IRS tax debt is not dischargeable, then yes, interest does accumulate during the time you are repaying your tax debt in your Chapter 13 Bankruptcy Plan.  You might get a bill from the Internal Revenue Service for accumulated interest during your bankruptcy case (aka post-petition interest) after you received a discharge for your Chapter 13 Bankruptcy.  The Chapter 13 Plan must provide for all interest accumulated up to the filing date of the petition but not post-petition interest unless it is a secured tax debt.

If the IRS tax debt is both secured and non dischargeable, the interest are provided for in your plan payment.

If the IRS tax debt is dischargeable, then all interests associated with that tax debt will be discharged and you should not receive a bill from the IRS for unpaid post-petition interest at the completion of your Chapter 13 Bankruptcy.

Why can't I provide for the post-petition interest in my Chapter 13 Bankruptcy plan payment?

According to Bankruptcy law, specifically 11 U.S.C. § 1322(b)(10), interest for tax debt owed to Internal Revenue Service or Franchise Tax Board can be provided in the plan payment only if the tax debt is secured or you make full payments to all your creditors under the plan.

For more information, call Muoi Chea Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA for a consultation.