Bankruptcy Court | Shared responsibility payments | Affordable Care Act | law of the free man

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Case: Szczyporski v. Internal Revenue Service (In re Szczyporski), No. 21-01858 (3d Cir., May 11, 2022).

In a recent 3rd Circuit case, the Court of Appeals upheld a ruling from the Eastern District of Pennsylvania Bankruptcy Court finding that payments owed by individuals to the IRS for so-called “shared liability payments” under the Affordable Care Act (“ACA”) are priority taxes in the event of bankruptcy.

The question is relevant for Chapter 13 debtors, as was the case here, based on the fact that tax debts are paid before other debts in a Chapter 13 plan. chapter 13 of an individual, while other non-priority debts can often be canceled or discharged. The existence of priority debts often affects the required amount of a Chapter 13 debtor’s plan payment, and may even prevent a Chapter 13 debtor from being able to confirm a plan when that debtor has insufficient income to satisfy. required payments – rendering a debtor’s plan unworkable.

The ACA’s individual mandate was later removed for individuals at the end of 2018, but the principles remain relevant with respect to other taxes in Chapter 13 cases, as well as cases brought under Chapter 7 or even cases individual chapter 11.

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