Paying Taxes Due After Filing Chapter 13

One reason people file a Chapter 13 bankruptcy  is that it provides a convenient mechanism for paying debts to the IRS that would not be discharged in a Chapter 7 bankruptcy, such as income taxes that are less than three years old.   The Chapter 13 debtor will be able to spread the payments over five years, and in most cases no additional interest will accrue after the filing date of the bankruptcy.

In some cases a taxpayer will even want to add income tax liabilities to the Chapter 13 bankruptcy plan, which fall due after the bankruptcy is filed.  For example if an individual files bankruptcy in November of 2012 and has a large balance due, when he files his 2012 tax return the following April, he may wish to amend his bankruptcy plan to also pay off his 2012 liability.

This is permissible under the law,  and it can  make sense to a debtor who is struggling already to keep up his plan payments and has little hope of coming up with the funds to pay the 2012 taxes with his return.  One thing to keep in mind in this case though is that because they fell due after the bankruptcy,  the 2012 taxes will continue to accrue interest on the unpaid balance during the bankruptcy.  Thus while the debtor will avoid harassment from the IRS and will probably reduce his total interest by doing it this way, he will often exit bankruptcy with unpaid interest still due to the IRS.