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Posts tagged "Bankruptcy"

Bankruptcy Courts Can Determine Tax Liability Under Section 505 if it Might Affect the Estate At the Time of Filing

In Bush v. United States of America, No. 16-3244, decided September 20, 2019, the Court of Appeals for the Seventh Circuit held that the Bankruptcy Court has jurisdiction to determine the amount of tax liability under Section 505 if it could possibly effect the creditors and the bankruptcy estate at the time the case is filed. The decision is centered on 11 U.S.C. § 505, which allows the bankruptcy court to "determine the amount or legality of any tax, any fine, or any penalty relating to a tax ...." In Bush, the debtors owed nearly $200,000 in taxes and penalties. The debtors petitioned the Tax Court for review and when trial was imminent, they stipulated to owing $100,000 in taxes but the amount of penalties were still in dispute. The debtors filed for bankruptcy on the date set for trial. The bankruptcy court declined to lift the automatic stay and the debtors then brought an adversary proceeding asking the bankruptcy court to set the penalty at 20% of their unpaid taxes pursuant to Section 505. The IRS sought to dismiss the adversary proceeding, which the bankruptcy court denied. The district court disagreed and found it did not have subject matter jurisdiction to resolve the dispute.

Ninth Circuit Decision Makes Virtually All Attorneys' Fees Incurred by Debtors in the Enforcement of the Automatic Stay Recoverable

In Easley v. Collection Serv. Of Nev., 910 F.3d 1286 (9th Cir. 2018), the Ninth Circuit Court of Appeals clarified a prior holding about the scope of attorneys' fees recoverable for enforcing the automatic stay. In particular, the court decided in In re Schwartz-Tallard, 803 F.3d 1095 (9th Cir. 2015) that reasonable attorneys' fees and costs incurred in defending a judgment rendered pursuant to Bankruptcy Code Section 362(k). Instead of defending a judgment, Easley successfully appealed an incorrect judgment in his favor. In reaching its decision, the court noted that Section 362(k) operates as a fee-shifting statute and that a fee award should not be diluted by "the time and effort spent on the claim itself," including successfully challenging an award or defending the same. Accordingly, it appears that virtually all reasonable attorneys' fees incurred by debtors in the enforcement of the automatic stay may be recoverable damages under 11 U.S.C. § 362(k).

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