Protecting Your LLC From Tax Debts In A Chapter 13 Bankruptcy

19 Mar Protecting Your LLC From Tax Debts In A Chapter 13 Bankruptcy

You can try. You will be held personally liable for some of your LLCs 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 LLCs 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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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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