12 B 17133, 18 A 00021
Plaintiffs Richard and Elizabeth Reuland (the “Reulands”) filed an adversary complaint against the Internal Revenue Service (the “IRS”), seeking (1) a determination that the IRS had violated the discharge injunction by attempting to collect certain tax debt that had been discharged through their chapter 13 bankruptcy case, (2) a permanent injunction against the IRS barring future attempts to collect that debt, and (3) attorney’s fees and costs.  The IRS moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted because the tax debt at issue is not dischargeable pursuant to 11 U.S.C. §§ 1328(a)(2) and 523(a)(1)(B)(ii) (excepting from discharge debts for tax returns filed both late and less than two years before bankruptcy).  The Reulands conceded that the tax debt was nondischargeable pursuant to those provisions.  They argued, however, that under United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010), the tax debt at issue was discharged because their plan provided for the debt and the IRS failed to object to or appeal confirmation.  In response, the IRS argued that Espinosa was inapplicable because the Reulands’ plan did not contain any specific language purporting to discharge the tax debt.  After distinguishing Espinosa from the Reulands’ case and considering other cases with similar facts, the Court held that the tax debt at issue had not been discharged because it is nondischargeable under §§ 1328(a)(2) and 523(a)(1)(B) and the Reulands’ plan did not contain specific language that provided for the discharge of the debt.  Thus, the Court granted the IRS’s motion, and dismissed the Reulands’ complaint with prejudice because, as a matter of law, it failed to state a claim upon which relief can be granted.