For the first time in the Bankruptcy Alphabet, I decided to draw my reference to a United States Supreme Court opinion.
Y is for Young v. United States (2002)
We previously discussed that, with one exception, taxes are nondischargeable debts in bankruptcy. That exceptions, the so-called “three year look-back period” provides that an income tax debt can be discharged if a return has been filed for the taxable year, a tax debt has been assessed by the taxing authority and more than three years have passed from the date of the bankruptcy petition filing. 11 U.S.C. §507(a)(8)(A).
This created a sort of loop-hole where a debtor, who files a tax return and is assessed a tax debt, could file a Chapter 13 Bankruptcy to prevent collection of the debt for three years, dismiss the Chapter 13 case and then file a Chapter 7 liquidation case to discharge the assessed tax debt because more than three years had passed from the date of the Chapter 7 petition filing.
The United States Supreme Court fixed this loop-hole in Young v. United States, 535 U.S. 43 (2002) by holding that the lookback period is tolled, or postponed, during the pendency of a prior bankruptcy petition.
Each state has at least one federal court district with a bankruptcy court that must interpret the application of the Bankruptcy Code to the individual cases. When courts are in dispute, appellate courts, such as the Eighth Circuit Court of Appeals and the United States Supreme Court, must resolve these disputes.
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