Can I Protect My LLC From Tax Debts If I File a Chapter 13?
By Peter Orville, Attorney at Law on Mar 19, 2008 in Bankruptcy Practice and Procedure, Chapter 13 Bankruptcy, General Bankruptcy Information, Protecting Assets In Bankruptcy, Small Business And Self-Employment, Tax Issues
You can try. You will be held personally liable for some of your LLC’s tax debts. Examples include sales tax, and the trust fund portion of employee withholding taxes. If you file a personal Chapter 13 (an LLC cannot file a Chapter 13), you can put your personal liability for the LLC’s taxes into your Chapter 13 plan.
A couple of problems may arise. First, even though you can be held liable for these LLC taxes, the taxing authorities may not yet have accessed them against you personally. If they have not yet been accessed against you, the Chapter 13 Trustee may take the position that they are post-petition debts and object to including them in your Chapter 13 plan.
The other problem is that there is no co-debtor stay in your Chapter 13 to protect the LLC. If you are allowed to pay the LLC tax debt in your personal Chapter 13, there is no automatic stay to protect the LLC. Even while the tax authority is receiving the money from your Chapter 13 trustee, they can continue with whatever collection efforts they want to take against the LLC.
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