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Part 5. Collecting Process
Chapter 9. Bankruptcy and Other Insolvencies
Section 1. Overview of Bankruptcy


5.9.1 Overview of Bankruptcy Federal Bankruptcy Law The Bankruptcy Court The Role of Insolvency Coordination with Other Government Agencies
Exhibit 5.9.1-1 Glossary of Common Insolvency Terms
Exhibit 5.9.1-2 Acronyms and Abbreviations
Exhibit 5.9.1-3 Case Assignments (05-20-2008)
Federal Bankruptcy Law

Authority. The US Constitution grants Congress authority to enact federal bankruptcy laws. The Bankruptcy Act of 1898 formed the basis of federal bankruptcy law until 1979 when enactment of the Bankruptcy Code (11 USC) repealed the old law and codified procedures making the bankruptcy process less burdensome for the debtor. The Bankruptcy Reform Act of 1994 (BRA 94) brought about a major amendment to the Bankruptcy Code affecting the government's treatment of debtors, notably granting permission to assess taxes while the debtor is under the protection of the automatic stay.

The Bankruptcy Abuse Prevention and Consumer Protection Act. On April 20, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was signed into law. Most of the provisions of this act became effective October 17, 2005, although some provisions, such as those dealing with Chapter 12 bankruptcies, were effective upon the date of enactment.

Principle of Bankruptcy. The general underlying principle of bankruptcy is to provide a debtor an avenue to pay what the debtor can afford while receiving forgiveness for debt that cannot be satisfied.

Automatic Stay. Prior to October 17, 2005, when a debtor filed a petition in bankruptcy court, in all instances the court entered an order for relief which immediately stopped ongoing and future (during the pendency of the bankruptcy) attempts by creditors to collect prepetition debts owed by the debtor or otherwise exercise control over property of the estate or the debtor (11 USC § 362). This essential feature of bankruptcy law created what is known as the automatic stay. For most debtors the automatic stay remains in effect during the pendency of the bankruptcy. But for debtors who file bankruptcy on or after October 17, 2005, and have had one or more bankruptcy cases dismissed within the preceding twelve month period, the automatic stay may either terminate within 30 days with respect to the debtor and the debtor's property that is not property of the bankruptcy estate or not go into effect at all. (See IRM,Serial Filers.)

Debtor. Most bankruptcy proceedings begin when the debtor (the person unable to pay his, her, or its debts) files a petition in bankruptcy court seeking financial relief from creditors. Individuals, corporations, partnerships, railroads, municipalities, and other forms of government have the right to file bankruptcy. Exhibit 5.9.1-1, Glossary of Common Insolvency Terms, defines " person" as it relates to bankruptcy.

Throughout this IRM chapter a taxpayer in an insolvency proceeding is generally referred to as a debtor.

Advantages to Debtors. When negotiations with creditors to pay debts fail, debtors may be faced with immediate garnishment of salaries and repossession of their assets. Business debtors may have their businesses closed through repossession or foreclosure. Bankruptcy is attractive to debtors because it can offer:

immediate temporary relief from creditor pressure by staying all creditor actions against the debtor;

long-term relief by allowing a debtor to extend the time for payment of a debt; and

permanent relief by discharging debts. The relief provisions of the Bankruptcy Code can give the debtor a "fresh start."

Creditor. Creditors include persons and entities who have claims against the debtor, usually for debts incurred before the bankruptcy was filed (prepetition debts). Because many debtors and bankruptcy estates continue to incur debt after the bankruptcy petition date, creditors can also hold postpetition claims. Upon occasion creditors force debtors into bankruptcy by involuntary means.

Advantages to Creditors. Bankruptcy offers advantages to creditors, such as the following:

A greater recovery on creditors' claims. Traditional debtor/creditor remedies may lead to piecemeal dismantling of the debtor's business through repossession and sale of the debtor's assets. Such actions by creditors may cause a business to fail.

The potential to preserve the going-concern value of a business which can exceed its liquidation value.

Allowing the sale of a business as an operating enterprise and restraining creditors from precipitous actions.

Distributing an equitable share of the available funds to each creditor.

Bankruptcy Code. The Bankruptcy Code provides an orderly method for the debtor's financial rehabilitation (Chapters 11, 12, and 13) or the liquidation and distribution of a debtor's assets (Chapter 7). This federal law is intended to be applied uniformly among all states and possessions. (03-01-2006)
The Bankruptcy Court

Jurisdiction. Bankruptcy courts generally have jurisdiction over all matters concerning payment of a debtor's financial obligations under the Bankruptcy Code and administration of the bankruptcy estate. Bankruptcy court jurisdiction includes the authority to determine the amount of tax due by the debtor or estate and what taxes will be discharged, meaning the debtor no longer will be personally liable. The bankruptcy court also has jurisdiction over any matters concerning collection of tax debts at issue in the bankruptcy case or collection from any property of the estate.

Bankruptcy Judges. Bankruptcy judges are appointed by the appellate circuit courts for a term of 14 years as provided under Article I of the US Constitution. (03-01-2006)
Associate Area Counsel

Office of Division Counsel. The Office of Division Counsel (Small Business/Self-Employed (SB/SE)) provides primary legal services on a local basis to the Small Business/Self-Employed and Wage and Investment Operating Divisions. It holds responsibility for collection and bankruptcy work regardless of the type of taxpayer entity involved.

Area Counsels/Associate Area Counsels. The Office of Division Counsel (SB/SE) headquartered in New Carrollton, Maryland, is divided into eight SB/SE Area Counsels with 49 local offices. Associate Area Counsel report to the Area Counsel for their geographic area.

Local Associate Area Counsel. Field Insolvency offices should deal directly with attorneys in their local Associate Area Counsel (SB/SE) offices on issues requiring case-specific legal advice and guidance. The Centralized Insolvency Operation (CIO) located at the Philadelphia Campus is assigned an Associate Area Counsel attorney in Philadelphia to deal with general bankruptcy questions. CIO questions dealing with complex issues or requiring Counsel action are transferred to the appropriate Field Insolvency group for referral to local Associate Area Counsel. Throughout IRM 5.9, Bankruptcy and Other Insolvencies, "Counsel " indicates Associate Area Counsel (SB/SE).

Communication – Counsel and Insolvency. A good working relationship between Insolvency and Counsel fosters quality bankruptcy programs. Ongoing dialogue between Insolvency and Counsel should be maintained to ensure proper actions are taken by Insolvency. Counsel can apprise Insolvency of current court decisions and litigation issues that affect case processing, particularly at the local level.

Outreach. Insolvency and Counsel are encouraged to interact with trustees and members of the bar association and work cooperatively at the local level to resolve matters of mutual concern. Outreach efforts afford an informal venue to resolve recurring bankruptcy issues and concerns with stakeholders. (03-01-2006)
Department of Justice - Tax Division

The Service's Lawyer. Under federal law the Department of Justice is the Service's lawyer representing the Internal Revenue Service (IRS) in bankruptcy court.

Delegation of Authority. Although the Assistant Attorney General (Tax Division) has the authority to handle most bankruptcy referrals, normally that authority is delegated to the United States Attorney in routine proceedings.

Direct Referrals. Pursuant to guidelines established by the Department of Justice, the United States Attorneys, and the Office of IRS Chief Counsel, Insolvency has the to authority to refer some types of cases directly to the Assistant Attorney General (Tax Division) or to the U. S. Attorney's Office. (See Delegation Order 25-9.)

SAUSAs. In some areas, Counsel attorneys are commissioned as Special Assistant United States Attorneys (SAUSAs). SAUSAs are assigned litigation responsibility for certain types of bankruptcy proceedings and issues. (03-01-2006)
United States Attorney

IRS Representative for Bankruptcy Court. In its capacity as the IRS representative for bankruptcy proceedings, the United States Attorney's Office is served with all legal bankruptcy documents. Although primary litigation responsibility rests with the Department of Justice Tax Division, it may be delegated to the local United States Attorney's Office, or to SAUSAs in Associate Area Counsel (SB/SE), depending on the judicial district, the legal issues inherent in the case, and the type of proceeding involved in the specific case. The US Attorney's office (i.e., Assistant United States Attorneys (AUSAs)) frequently represent the government in bankruptcy court proceedings for formal court appearances.

In addition to representing the IRS in bankruptcy proceedings, AUSAs serve as legal representatives for other governmental agencies. (05-20-2008)
The Role of Insolvency

Introduction. Bankruptcy law is the prevailing authority when a taxpayer files bankruptcy. Bankruptcy laws are separate from tax laws, and coordination is necessary to comply with both. Insolvency, a part of the Collection function for the Small Business/Self Employed Operating Division of the IRS, is responsible for administering that coordination.

Insolvency Organizations. Insolvency is divided into a Field operation consisting of more than 70 posts of duty geographically distributed throughout the country and a single Centralized Insolvency Operation (CIO) in Philadelphia.

The CIO performs most clerical duties for all bankruptcy chapters, including loading cases on AIS. Centralized Insolvency works Chapter 7 No Asset cases. It also monitors Chapter 13 cases after plan confirmation and processes Chapter 13 trustee payments. Upon closure of a Chapter 13 case by the bankruptcy court, the CIO makes any necessary account adjustments and closes the case on AIS.

The Field Insolvency function generally works Chapter 13 cases until confirmation. On Chapter 11 cases they review, monitor, process payments, and take closing actions. The Field works all Chapter 7 Asset cases. Field caseworkers review schedules and plans for Chapter 13, Chapter 11, and Chapter 12 cases, make referrals to Counsel for all chapters, appear in court as expert witnesses, attend § 341 meetings, participate in outreach efforts, and negotiate with debtors or their representatives.

A toll-free number (1-800-913-9358) has been established at the CIO in Philadelphia to handle most Chapter 7 No Asset and Chapter 13 bankruptcy inquiries. (See IRM 5.9.19,Insolvency Disclosure and Telephone Procedures.) When calls come into Field Insolvency, the caseworkers should work the cases until all actions are completed for:
• Chapters 9, 11, 12, and 7 Asset cases;
• Chapter 13 cases pre-confirmation or currently assigned to a Field Insolvency group; and
• complex cases identified in paragraph (3) below.
All other cases should be referred to the CIO.

The CIO liaison may contact the Field Insolvency liaison for assistance with technical questions unique to a court jurisdiction or a specific case.


Complex Issues. Regardless of chapter or dollar amount, Field Insolvency will handle the following tasks deemed as complex issues with a timeliness appropriate to the nature of the issue:

Acting as expert witnesses

Responding to adversarial motions

Responding to objections

Filing objections

Preparing proofs of claim

Amending or withdrawing claims

Negotiating adequate protection agreements


Securities Investor Protection Act (SIPA) cases (handled by Manhattan and St. Paul Insolvency groups)

Assignments for the benefit of creditors

Commodity broker bankruptcies

Dealing with Abusive Tax Avoidance Transactions (ATAT)

Pursuing exempt, excluded, and abandoned assets

Dealing with lien priority issues

Negotiating plans

Addressing Tax Equity and Fiscal Responsibility Act (TEFRA) issues

Dealing with Limited Liability Companies (LLCs)

Working cases with accepted offers in compromise

Addressing Foreign Bank and Financial Account Report (FBAR) penalties ( handled exclusively by the Los Angeles Insolvency office)

Handling any case requiring action by the United States Attorney, Special Assistant US Attorney (Area Counsel), or the Department of Justice.

Trust Fund Recovery Penalties

Installment agreement requests on postpetition periods

Trustee refund turnover splits allocating refund amounts between the non-debtor spouse's share and the debtor's share to be sent to the trustee

Non-"Complex" Cases to Be Worked by Field Insolvency. Issues not considered complex, but still required to be worked by Field Insolvency include the following:

Defaulted Chapter 13 plans

Amended Chapter 13 claims

Postpetition liabilities

Consolidated or jointly administered claims

Requests for an "agreement," "conditional dismissal," or "settlement" on the tax

Asset determinations in community property states

Requests for court action or action by the US Attorney or SAUSA

Escrow payoff requests for all chapters except 7 cases assigned to the CIO

341 meeting attendance if needed

Bankruptcy fraud referrals

Lock-in letters.

Insolvency Responsibilities. Together the two Insolvency functions handle all bankruptcy cases and are primarily responsible for the IRS bankruptcy program.

Insolvency, both Field and CIO, must ensure actions are taken to suspend collection upon the filing of a bankruptcy when appropriate and monitor their respectively assigned cases. In addition, Field Insolvency must ready accounts for proof of claim filing.

Caseworkers must report to their managers when tasks involving bankruptcy code compliance, protection of the government's interests, or compliance monitoring may not be completed so the manager can redirect inventory or provide training.

All Insolvency staff (clerical, paraprofessional, and professional) are charged with protection of the government's interests while the debtor's accounts are under the jurisdiction of the bankruptcy court.

Insolvency caseworkers must be knowledgeable about the Bankruptcy Code and understand its impact on the collection of taxes.

Cessation of Collection Actions. Filing bankruptcy usually gives a debtor immediate relief from all demands for payment and collection enforcement actions. IRS employees, upon learning of a bankruptcy, generally should cease all demands and enforcement actions directed against the bankrupt taxpayer (debtor) and take prompt and appropriate corrective actions unless the court determines the automatic stay is not in effect. Revenue officers in the midst of a seizure when a bankruptcy is filed should work with Insolvency and Counsel before proceeding. Failure to observe an automatic stay may result in the Service's being sued for damages and attorney fees, although punitive damages cannot be awarded.

Coordination with Other Functions. Insolvency is charged with processing bankruptcy cases involving the IRS, as well as coordinating the activities of other functions on all bankruptcy cases. Insolvency caseworkers, leads, and managers must assist other Service employees when bankruptcy-related case issues arise and elevate the more complicated and significant issues to Counsel.

Balancing the Interests of the Debtor and the Government. Insolvency must follow established procedures to ensure debtors are afforded protections guaranteed them under the Bankruptcy Code. Insolvency caseworkers are charged with processing bankruptcy cases fairly and efficiently in a manner that balances the interests of the debtor with the interests of the government while attempting to collect the proper amount of tax.

Redacted SSNs. To protect taxpayers' privacy, documents submitted to the court cannot provide full Social Security numbers (SSNs). Only redacted SSNs, giving the last four numbers of an SSN, are allowed. Employer Identification Numbers (EINs) should be provided in full.

Avoiding Litigation. To avoid unnecessary litigation when disputes arise between a debtor and the Service, in most cases Insolvency caseworkers should negotiate with debtors or their representatives to arrive at a mutually agreeable solution before resorting to a referral to Counsel.

Insolvency specialists and advisors should refer "sensitive" or high dollar cases to Counsel rather than engaging in direct negotiations themselves.

If a case is referred to Counsel without the caseworker's negotiating with the debtor or the debtor's representative, justification for doing so must be entered in the AIS history. Caseworkers must exercise expertise and tact during the negotiation process, dealing with debtors according to the provisions of the Bankruptcy Code.

Deadlines/Referrals. Insolvency employees must analyze pending litigation issues and meet strict deadlines. When necessary, Field Insolvency caseworkers prepare referrals to Counsel so the government can prepare a timely and effective case position. In bankruptcy matters involving high volume Chapter 13 cases, Insolvency must work efficiently to meet the short timeframes between petition dates and confirmation hearings.

First Meeting of Creditors. Field Insolvency specialists, advisors, or revenue officers (ROs) may attend the first meeting of creditors (§ 341 meeting) to question the debtor. (See IRM,First Meeting of Creditors.)

Expert Witness. Field Insolvency specialists or advisors testify in bankruptcy court as expert witnesses on behalf of the Service. This duty requires intensive preparation. The employee must understand the issues in dispute and capably provide expert testimony to protect the government's interests.

Overall Responsibilities. Overall, Insolvency's responsibilities extend to a commitment of the following:

Prevention and correction of violations of the Bankruptcy Code

Timely case freezes and resolution of prepetition issues

Quality preparation and timely filing of proofs of claim

Entering into meaningful negotiations to avoid litigation

Timely reviews and objections to plans

Monitoring debtor tax compliance, including trust fund taxes and the pyramiding of business taxes

Overall protection of the government's interests

IRM, Insolvency's Responsibilities and Authority,

provides additional information on Insolvency's role within the Service. (05-20-2008)
Coordination within Insolvency
Responsibility for Bankruptcy Freezes. The Centralized Insolvency Operation ensures freezes are input on accounts when notification of a bankruptcy filing is received by the CIO. When Field Insolvency personnel learn of a bankruptcy before notification is received by the centralized site, the Field employee is responsible for advising the CIO through fax, phone, or secured E-mail so the case can be loaded on AIS immediately. If the probability of a stay violation exists before a systemic bankruptcy freeze can be posted to the account, the Field specialist or advisor should input the freeze manually and load the case on AIS.

Claim Preparation. The initial proof of claim usually generates through the Automated Proof of Claim (APOC) system. Docket and processing period flags result from claims that cannot be completed through APOC. Specialists and advisors must perfect the claim flags in their respective inventories so APOC can complete claim generation. When a debtor files bankruptcy in an area other than where the delinquent accounts are located, the Insolvency office where the bankruptcy is pending has the responsibility for perfecting IRS claims and taking all necessary pre-confirmation actions.

Coordination of Efforts. When Field Insolvency identifies tax accounts assigned to its local area, but learns the taxpayer has a bankruptcy pending in a court jurisdiction elsewhere, the Insolvency unit having the tax accounts must make prompt contact with the other Insolvency group. The two Insolvency groups must coordinate actions in the case, such as resolving outstanding levies, identifying all accounts, and performing lien research.

Change of Venue. A bankruptcy case may be transferred from the jurisdiction of one court to the jurisdiction of another court. For 7 No Asset cases, the change will be made by the CIO. For other chapters this movement may require the reassignment of the case from one Field Insolvency office to another. The Field Insolvency managers of the two groups involved must coordinate the transfer of AIS information and any paper or electronic files.

Mail Received by Insolvency. The Centralized Insolvency Operation has a national mailing address for Insolvency correspondence. However, Field Insolvency still receives some mail, notably correspondence dealing with receiverships, SIPA proceedings, assignments for the benefit of creditors, and Chapter 9, 11, or 12 bankruptcies. IRM 5.9.11,Insolvency Mail Processing , details mail handling by both Field Insolvency and the CIO.

Payments. The CIO receives and posts Chapter 7 and Chapter 13 remittances. Field Insolvency posts payments for Chapters 9, 11, and 12. (See IRM 5.9.15,Payments in Bankruptcy.) (05-20-2008)
Internal Revenue Manual 5.9

The Insolvency Proceedings IRM. Internal Revenue Manual (IRM) 5.9, Bankruptcy and Other Insolvencies , contains policy, procedures, information, instructions, guidance, and references concerning bankruptcy proceedings, stockbroker insolvencies, receiverships, assignments for the benefit of creditors, corporate dissolutions, and bulk sales. The text in this manual chapter may be helpful for the Service at large, but it is specifically addressed to the Field Insolvency and Centralized Insolvency functions and revenue officers in the Technical Advisory function. IRM 5.9 provides processing actions Insolvency employees and Technical Advisory employees must take on the insolvency cases assigned to them.

Due to the rarity of Chapter 9 bankruptcies and the complexity of Chapter 15 bankruptcies, only minimal information is provided in IRM 5.9 on governmental and cross-border bankruptcy filings.

Users. Most IRS employees outside of Insolvency will be able to find basic information on bankruptcies in IRM 5.9 sections 1 through 4. Insolvency employees should refer to all sections in IRM 5.9 as needed. Revenue officers in the Technical Advisory function should refer to IRM 5.9.20.

Sections in the Insolvency Proceeding IRM. The sections of IRM 5.9 listed below may apply in varying degrees to Service employees having contact with taxpayers who have filed bankruptcy or whose cases have insolvency issues.

Overview of Bankruptcy

The Bankruptcy Code and Collection

Debtors' Delinquent Accounts

Common Bankruptcy Issues

Opening a Bankruptcy Case

Processing Chapter 7 Bankruptcy Cases

Processing Chapter 9 and Chapter 15 Bankruptcy Cases

Processing Chapter 11 Bankruptcy Cases

Processing Chapter 12 Bankruptcy Cases

Processing Chapter 13 Bankruptcy Cases

Insolvency Mail Processing

Insolvency Automated Processes

Manual Proofs of Claim and Common Claim Issues

Electronic Proofs of Claim and Automated Proofs of Claim

Payments in Bankruptcy

Insolvency Case Monitoring

Closing a Bankruptcy Case

Automated Discharge System

Insolvency Disclosure and Telephone Procedures

Non-Bankruptcy Insolvencies

Counsel Advice. While all bankruptcies are filed under the Bankruptcy Code, the interpretation and application of that law varies from one judicial district to another. As a result IRM 5.9 cannot be all inclusive. Caseworkers should seek guidance from Counsel when necessary, research other sources, and become familiar with local rules and standing orders.

Advice from local Counsel is restricted to case-specific issues. Questions concerning IRM procedures and policy decisions surrounding case processing must be directed to Policy, Technical and Insolvency, in SBSE Headquarters. (03-01-2006)
Coordination with Other Government Agencies

Other Government Agencies. Frequently, governmental departments and agencies, other than the Department of Treasury, have an interest in a pending bankruptcy proceeding. Their interest may result from:

a contractual relationship with the debtor;

a determination the debtor received excessive profits which should be repaid;

the debtor's defrauding the government in some way; or

any activity causing a department or agency to owe money to, or have a claim against a debtor.

Service Cooperation. The Service has a responsibility to cooperate and assist in collecting debts due the United States which arise out of the activities of any other department or agency. However, after the debtor files for protection of the bankruptcy court, the collection of those debts may be prohibited by the automatic stay. In these and similar situations, it will sometimes be necessary to deal with other departments or agencies of the government.

Refund Setoffs – Other Agencies. A debtor might owe no federal taxes and be due a federal tax refund. A department or agency might seek a setoff of an amount to cover an indebtedness through the tax refund due the debtor. While setoffs, other than those for domestic support on cases filed on or after October 17, 2005, are prohibited once a bankruptcy is filed because of the automatic stay imposed by the bankruptcy, the other agency may be able to obtain relief from the stay to allow setoff. Before disclosing or acknowledging the existence of a tax refund and making it available for setoff to another government agency other than for domestic support, disclosure consent must be obtained from the taxpayer. Guidance from Counsel should be obtained whenever the Service is asked to freeze a debtor's tax refund so it may be setoff against another agency's debt.

Counsel Guidance. When coordination with other government agencies or departments (except Treasury) becomes necessary in a pending or actual bankruptcy proceeding, any problems and/or recommendations should be presented to Counsel. IRM,Offsets to Other Agencies, and IRM, Federal Payment Levy Program (FPLP), provide additional information.


Exhibit 5.9.1-1 (05-20-2008)
Glossary of Common Insolvency Terms

Abandonment Abandonment is the process of severing a bankruptcy estate’s interest in property. Under the Bankruptcy Code, the bankruptcy court may permit the trustee to abandon any property of the estate that is burdensome or of inconsequential value to the estate. Abandonment to avoid adverse tax consequences is an issue when the debtor is an individual in Chapter 7 or Chapter 11.

— Affirmative Act: The trustee may actively abandon or a party in interest may request abandonment. The trustee may abandon to the debtor or a party with a possessory interest. Notice of hearing is required, although hearing notice can be general, and a hearing is not always held.
— Administrative Abandonment: If the property is listed in the schedules, but it is not administered by the trustee (i.e., sold), then it is abandoned to the debtor upon closing of the estate.
Adequate Protection Under the Bankruptcy Code, a secured creditor is allowed to have its secured interest " adequately protected" while the automatic stay is in effect. This arises when the property is depreciating or, in some cases, when the accrued interest on a defaulted loan is diminishing the equity in the property. The court may award the creditor some protection against the loss of value rather than modifying the automatic stay. Adequate protection most commonly consists of periodic cash payments and replacement liens in postpetition assets.
Adequate Protection Agreement An agreement between a debtor and a secured creditor to protect the creditor's secured portion until a plan of reorganization is confirmed.
Administrative Expense A liability incurred by the bankruptcy estate for actual, necessary expenses of preserving the estate. This includes tax liabilities for periods ending postpetition and before discharge or dismissal for which the estate is liable. The IRS is entitled to payment of these taxes from the estate as a priority tax (generally paid at time of confirmation). 11 USC § 503 defines allowable administrative expenses and IRC § 1398(h) explains the proper handling of these expenses on the bankruptcy estate's tax return.
Adversary Proceeding A lawsuit within the bankruptcy case in which one party files a complaint to seek relief (for example, to recover money or property, to determine the validity of a " lien," to determine dischargeability of a debt, or to obtain an injunction). Adversary proceedings involve more legal formalities than contested matters.
AMDISA Examination function systems that Insolvency frequently uses while researching tax accounts.
AIMS — The Audit Information Management System used by examination function.
AMDIS — The Audit Management Display Information System; one of examination's Command Codes used on the Integrated Data Retrieval System (IDRS) to show any return that is being audited by the examination function.
AMDISA — Same as AMDIS, except it displays specific information on an open tax period.
AIS Automated Insolvency System (AIS). The bankruptcy database maintained by Insolvency. Its many functions work together to allow Insolvency to manage all of the bankruptcy cases in Insolvency's inventory.
ASED The Assessment Statute Extension Date (ASED) marks the date the statutory period of time for assessing a tax ends. The timeframe for assessing a tax is normally three years from the due date, or three years from the date the return is filed, whichever is later ( IRC § 6501).
Asset Case A bankruptcy case in which the debtor has assets which are non-exempt (i.e., available for use in satisfying creditors' claims). In a no asset case, the debtor has only exempt or excluded assets, such as a personal home or a retirement plan, that are not available to pay claims.
Automatic Stay An injunction that arises by operation of bankruptcy law when a bankruptcy is filed (11 USC § 362). The automatic stay is effective as of the bankruptcy petition date. It is a prohibition on the commencement or continuation of any legal or enforcement activities against the debtor, the debtor's property, and property of the estate (subject to certain exceptions).
• The stay stops all debt collection activities, solicitation, and foreclosure, as well as commencement or continuation of proceedings against the debtor, the debtor's property, and/or the estate’s property.
• Any willful violation of the stay may give the debtor the right to claim actual damages and attorney’s fees (but not punitive damage fees).
Note: Creditors may ask the court for relief from the automatic stay to permit them to pursue collection remedies, such as a foreclosure action on real property, or to offset a tax refund.
Bankruptcy Refers to a judicial process to resolve a debtor's problems in paying debts incurred by the debtor. The term bankruptcy is usually used in connection with the federal bankruptcy laws enacted by Congress. While bankruptcy proceeding generally refers to a proceeding brought in the federal bankruptcy courts governed by the Bankruptcy Code, the terms insolvency proceeding and receivership usually refer to proceedings brought under state laws and supervised by the state courts. A bankruptcy can either be voluntary or involuntary. 11 USC § 303 provides the requirements to file an involuntary petition.
Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) Most of the provisions of BAPCPA are effective for cases filed on or after October 17, 2005. However, some BAPCPA provisions, such as certain provisions relating to Chapter 12 debtors, took effect on April 20, 2005, the date of enactment. Many provisions of BAPCPA are intended to keep debtors from abusing the bankruptcy system. Such provisions may limit the imposition of the automatic stay in cases of serial filings, require tax compliance from individual debtors, and establish a means test for Chapter 7 debtors. BAPCPA also added a new Chapter 15 to deal with cross-border bankruptcies.
Bankruptcy Code The laws of bankruptcy codified under Title 11, United States Code, §§ 101 through 1532.
Bankruptcy Court A court created by Congress pursuant to Article 1 of the US Constitution to hear bankruptcy cases. US District Courts have delegated jurisdiction to bankruptcy courts to hear cases arising under Title 11.
Bankruptcy Estate See Estate.
Bankruptcy Petition The form filed by the debtor (or against the debtor by creditors in an involuntary bankruptcy) with the bankruptcy court requesting relief from creditors. It is filed to commence a case under any chapter of the Bankruptcy Code.
Bankruptcy Reform Act of 1994 (BRA 94) Signed into law and effective for all bankruptcy cases filed on or after October 22, 1994. It made changes to the bankruptcy law such as permitting assessments and issuing notice and demand during the automatic stay and the filing of late proofs of claim in Chapter 7 cases.
Bankruptcy Rules Rules of procedure that govern the practice and procedure in bankruptcy cases.
Bar Date The date fixed by the court or by statute as the date by which a creditor must file a proof of claim. The Service is allowed a minimum of 180 days after the order of relief in which to file a proof of claim. The court may grant extensions for cause.
Case Docket The official record of the bankruptcy case. It shows every event and every document filed in the case. The docket is maintained by the bankruptcy clerk’s office.
Cash Collateral 11 USC § 363(a) defines cash collateral as "cash, negotiable instruments, documents of title, securities, deposit accounts or other cash equivalents." It simply means cash or cash equivalents which are property of the estate and in which the IRS or other creditor has a secured interest.
Change of Venue Change of location of the bankruptcy filing; usually due to the debtor relocating from one part of the country to another. The bankruptcy jurisdiction is changed to a court in the debtor's new location.
Chapter 7 A liquidation proceeding filed under Chapter 7 of the Bankruptcy Code by an individual, business, or other entity, where creditors are paid by liquidation and distribution of the debtor's assets, if any are available.

Chapter 9 A bankruptcy proceeding for a governmental unit. In order to qualify as a debtor under Chapter 9, an entity must, among other things: be a municipality, be authorized to be a debtor by state law, be insolvent or unable to meet its debts as they mature, and desire to effect a plan to adjust such debts.
Chapter 11 A reorganization proceeding filed under Chapter 11 of the Bankruptcy Code by an individual, business, or other entity where creditors are paid under a plan. A plan can last several years; however, a large percentage eventually liquidate.
Chapter 12 This chapter applies to family farmers and fishermen. It closely resembles a Chapter 13 but without a super discharge. It operates under a plan. Payments may be paid seasonally.
Chapter 13 This chapter applies to individuals with regular income, sole proprietors, and other self-employed individuals. Chapter 13 is a reorganization proceeding of an individual with regular income, including wage earners, where creditors are paid under a plan. Plan payments are paid through a trustee who handles all disbursements.
Chapter 15 This chapter applies when (1) a foreign court or a foreign representative seeks assistance in the United States in connection with a foreign proceeding; (2) assistance is requested in a foreign country in connection with a case under 11 USC; (3) a foreign proceeding and a domestic bankruptcy for the same debtor are pending concurrently; or (4) creditors or other interested persons in a foreign country have an interest in requesting the commencement of, or participating in, a case or proceeding under 11 USC.
Claim A right to payment even if unliquidated, contingent, or disputed. Proofs of claim may include tax liabilities which have not been assessed. Also see Proof of Claim.
Co-Debtor Stay Under the Bankruptcy Code, the co-debtor stay applies only to consumer debts. It does not apply to taxes. See Consumer Debt.
Commencement Date The day on which a bankruptcy petition is filed.
Commodity Futures A speculative investment in a good that is mined or agriculturally produced.
Complaint A pleading filed by a party to the bankruptcy case to initiate an adversary proceeding.
Confirmation The time when the court grants final approval to the debtor's plan of reorganization. Applicable only in Chapters 11, 12, and 13 bankruptcies.
Consumer Debt A debt incurred by an individual primarily for personal, family, or household purposes.Does not include taxes. See Co-Debtor Stay.
Conversion When a debtor voluntarily or involuntarily changes from one chapter of bankruptcy to another chapter with the approval of the bankruptcy court.
Cram Down In the event any class of claims or interests is impaired under a plan of reorganization in Chapter 11 and does not garner the minimum percentage of votes to accept the plan, the plan's proponent may request the court to confirm the plan by the alternative cram down method. As long as at least one class of creditors approves the plan, the plan does not discriminate unfairly, and meets the fair and equitable treatment of creditors as required by the Bankruptcy Code, the court may confirm the plan.
Creditor Person or entity with a claim against the debtor and/or property of the debtor at the time the bankruptcy petition is filed.
Customer Creditor A customer creditor is someone who has engaged the services of a broker who is now engaged in an insolvency proceeding. The customer has entrusted the broker with securities (typically funds) to hold in the normal course of business and for the purposes of conducting business on the customer’s behalf.
CSED The date on which the collection statute expires is called the Collection Statute Expiration Date (CSED). The statutory period for collecting a tax is normally ten years from the date of assessment ( IRC § 6502 ).
Debtor The person or entity (corporation, partnership, municipality) that: (1) files a voluntary petition, or (2) has an order of relief entered against it when an involuntary petition is filed with the bankruptcy court.
Debtor-in-Possession (DIP) The debtor in a Chapter 11 reorganization is known as a debtor-in-possession (DIP) when the debtor remains in full control of all of the assets. The DIP is charged with the duties and responsibilities of a trustee to maximize the assets of the estate for the benefit of all creditors.
De Minimis Lacking significance or importance. In regards to IRM 5.9, referring to dollar amounts de minimis means $100 or less.
Discharge A court order which extinguishes the debtor's personal liability on many prepetition debts. It is the event that triggers forgiveness of debt in a bankruptcy case. Generally, a discharge is granted (a) in an individual debtor's Chapter 7 case 60 days after the date set for the first meeting of creditors (11 USC § 341 Meeting); (b) in a Chapter 11 case when the plan is confirmed; and (c) in Chapter 12 and 13 cases when the plan is completed (3–5 years). Individual Chapter 11 filers whose bankruptcies commence on or after October 17, 2005, are discharged upon completion of plan payments rather than on the date of confirmation.
Discharge Date The date the court records the discharge.
Discharge, Denial of The situation in which a debtor goes through the bankruptcy proceeding and is still held responsible (usually for cause) for all of the prepetition liabilities. There is no income from the forgiveness of debt because none was given. Acts as a dismissal.
Discharge Injunction Under 11 USC § 524, a discharge operates as an injunction against any collection action to recover discharged tax liabilities from the debtor. Damages against the IRS could result if the injunction is violated. Also see Violation of Stay.
Disclosure Statement In a Chapter 11 case, an approved disclosure statement must generally accompany the proposed plan of reorganization before the plan is confirmed. The disclosure statement must contain adequate information concerning the affairs of the debtor to allow the creditors to make an informed judgment about the plan. However, for post-BAPCPA cases, electing small businesses may be subject to less stringent disclosure statement requirements (11 USC § 1125(f)).
Dismissal The term used when a bankruptcy proceeding is terminated prematurely. Debts are not forgiven, and the debtor does not receive a discharge. If a bankruptcy case involving an individual Chapter 7 or Chapter 11 is dismissed by the court, the estate is not treated as a separate entity ( IRC § 1398(b)(1) ). The debtor's tax status is treated as if a bankruptcy proceeding had not occurred. When a bankruptcy case is dismissed, the debtor is restored to the debtor’s prepetition position. Upon dismissal, the debtor is no longer protected by the automatic stay, and the IRS can resume administrative collection.
Distribution Order A Distribution Order authorizes the case trustee to pay creditors the amounts listed in the order. It is usually prepared by the Chapter 7 case trustee and entered by the court.
Estate A bankruptcy estate is created upon the filing of the bankruptcy case. It generally consists of all of the debtor’s interests in any property at the time the case is filed, plus property acquired by the estate after the petition is filed.
Note: The estate may also include a non-debtor spouse's community property interests.

In an individual Chapter 7 or 11 case, the bankruptcy estate is a separate taxable entity. In Chapter 13 cases, certain assets acquired by the debtor postpetition may also be included in the estate (11 USC § 1306). In individual Chapter 11 cases filed on or after October 17, 2005, property of the estate also includes post-petition earnings from services performed by the debtor (11 USC § 1115).
Examiner An examiner may be appointed in a Chapter 11 case to investigate the financial affairs of the debtor. An examiner does not replace the debtor-in-possession as does a Chapter 11 trustee.
Excluded Assets A property interest that does not become property of the bankruptcy estate upon the petition date. A valid Notice of Federal Tax Lien (NFTL) is not required for collection from excluded assets on dischargeable taxes although a statutory lien is required. Non dischargeable taxes may also be collected from excluded assets.
Exempt Property Property that cannot be liquidated by the trustee and is not liable for any debts of the debtor except alimony, security interests, non-dischargeable tax debts, and dischargeable taxes secured by an NFTL. Depending upon state law a debtor may choose between state and federal exemptions. Only individuals can exempt property (e.g., a homestead, vehicles, personal furnishings).
53 Account - CNC A balance due account that is considered Currently Not Collectible (CNC). Frequently used in Chapter 7 corporate accounts and Chapter 11 liquidating bankruptcies at close of bankruptcy. Processed by use of Form 53.
First Meeting of Creditors (FMC) (341 Meeting) The meeting at which the debtor is required to testify under oath about financial affairs and to respond to questions from creditors and the trustee. Usually held within 20 to 50 days after a case is commenced under any chapter of the Bankruptcy Code. It is also referred to as the Section 341 Meeting, 341 Meeting, or 341 Hearing (11 USC § 341).
Fraudulent Conveyance A transfer of any property by the debtor within one year before the bankruptcy petition with the intent to hinder, defraud, or delay a creditor. When brought to light, the trustee can successfully challenge the transfer and request turnover of the property to the estate (11 USC § 548). For cases filed on or after October 17, 2005, the look back period is two years.
Fresh Start Refers to the goal of bankruptcy to give the debtor a new financial life free from many past debts.
Gap Period Taxes Tax liabilities and penalties which accrue during the interim period after an involuntary bankruptcy case is filed and before an order for relief is entered.
General Unsecured Claims See Unsecured General Claim.
Hardship Discharge When circumstances beyond the debtor's control prevent the Chapter 13 debtor from modifying or completing the plan, the debtor can receive the same type of discharge that would have been received had the debtor been discharged in a Chapter 7 case – if certain requirements are met (11 USC § 1328(b)). Chapter 12 affords a similar discharge but under more limited circumstances (11 USC § 1228(b)).
Individual Debtor A person who files bankruptcy as an individual rather than as a partnership or corporation. The individual debtor may file singly or jointly with a spouse.
Insider If the debtor is an individual, an "insider" includes a relative or partner of the debtor, a partnership in which the debtor is a general partner, a general partner of the debtor, or a corporation of which the debtor is a director, officer, or person in control. If the debtor is a corporation, an "insider " includes a director of officer of the debtor or a person in control of the debtor (11 USC § 101(31)). An insider may be subject to different treatment under the Bankruptcy Code. For example, the time period for recovering preferential transfers to an insider is one year as opposed to 90 days for transfers made to non-insiders.
Insolvency Generally understood to mean an inability to pay debts as they become due. However, the Bankruptcy Code refers to an insolvent entity as one whose debts are greater than the fair market value of its assets (11 USC § 101(32)). A debtor need not be insolvent to file bankruptcy. See Bankruptcy.
Involuntary Bankruptcy Petition The situation in which creditors file a bankruptcy petition, forcing a debtor into bankruptcy involuntarily. See Bankruptcy and Order for Relief.
IRC § 6020(b) Section 6020(b) of the Internal Revenue Code allows the IRS to prepare and execute a return when a taxpayer fails to make a required return or makes a false or fraudulent return. 6020(b) returns are not returns for dischargeability purposes under 11 USC § 523.
Joint Petitioners When a married couple files a bankruptcy, a joint petition may be filed by an individual and spouse, and the joint filing is administered as one proceeding.
Joint Return/Separate Bankruptcy Petitions Filed by Each Spouse The situation in which spouses file a joint income tax return and file separate bankruptcy petitions either on the same date or on different dates. The cases may or may not be "consolidated" into a single case.
Joint Return/Single Debtor (Debtor and Non-Debtor Spouse) The situation in which spouses file a joint income tax return but only one spouse declares bankruptcy. The person who files for bankruptcy protection is known as the debtor and the other spouse, who does not file bankruptcy, is known as the non-debtor spouse.
Levy An IRS enforcement tool used to attach tangible and intangible assets. A levy is not allowed to collect prepetition tax liabilities when the automatic stay is in effect.
Lien An encumbrance on property or rights to property as security for a debt or obligation. The Service is prohibited from filing a Notice of Federal Tax Lien on a prepetition tax debt until the stay is lifted, but a refiling of a tax lien is allowed. See NFTL.
Lifting the Automatic Stay Relief obtained by a specific creditor from the bankruptcy court that lifts the injunction under 11 USC § 362 against that creditor to permit a certain action, such as selling assets seized prior to the petition date. The automatic stay is automatically terminated as to all creditors when the discharge is granted or the case is closed or dismissed. For cases filed on or after October 17, 2005, § 362 outlines new provisions which may eliminate the need to seek relief from the stay where the debtor is abusing the bankruptcy system (11 USC §§ 362(b)(21), 362(c)(3) & (4), and 362(n)).
Liquidation The act of reducing tangible and intangible assets to cash. This applies to Chapter 7 cases in which the business ceases to exist and its assets are sold. For individuals, the liquidation is limited to non-exempt assets. Some debtors attempt to liquidate through a Chapter 11 bankruptcy proceeding.
Local Rules Each bankruptcy court may make and amend its own local rules governing its practice and procedures in that specific jurisdiction. However, the local rules cannot be inconsistent with the Federal Bankruptcy Rules.
Monthly Operating Reports The reports required to be filed in all Chapter 11 cases by debtors-in-possession or trustees. Generally, the reports include a cash receipts and disbursements journal, income statement, and balance sheet analysis.
No Asset Case A no asset case is one where no equity in the debtor’s assets is available to pay unsecured creditors because all of the debtor’s assets are exempt, excluded, fully encumbered by secured liens, or have little value (Chapter 7). Generally, the Service and other creditors do not file claims in no asset cases, unless or until the bankruptcy trustee provides further notice that assets have been found (Bankruptcy Rule 2002(e) and 3002(c)(5)).
Non-Exempt Assets Assets which are part of the bankruptcy estate (i.e., the property available to satisfy creditors' claims). Also see Asset Case.
Non-Pecuniary Loss Penalty A non-pecuniary loss penalty is a punitive penalty, or "fine." Examples are failure to file, failure to pay, frivolous, fraud, and willful misconduct penalties. Generally, the Service receives only minimal payments on these types of penalties.
NFTL Notice of Federal Tax Lien (NFTL). For tax purposes, a properly filed NFTL secures the tax liability up to the value of the equity in the debtor's assets. Also see Secured Claim.
Objection to Claim A motion filed with the bankruptcy court by a debtor, creditor, or trustee to object to all or parts of a claim. A hearing will be held to resolve the dispute. Most bankruptcy court litigation, including objections to claim, are brought by motion pursuant to the less formal contested matter procedures.
180–Day Reports Each Chapter 7 trustee must submit to the United States Trustee an interim report on each asset case that was open at the beginning of the reporting period. The interim report consists of an Estate Property Record and Report and a Cash Receipts and Disbursements Record.
Order for Relief The filing of a bankruptcy petition constitutes an order for relief in a voluntary bankruptcy case. In an involuntary case, the court orders relief after notice and hearing (Bankruptcy Rule 1013).
PACER Public Access to Court Electronic Records (PACER). An electronic court notification/information system providing ready information to the public on court records. PACER maintains records and provides a current status on the majority of bankruptcy cases.
Pecuniary Loss Penalty Assessed to reimburse and compensate the government for an actual loss of taxes, such as the Trust Fund Recovery Penalty (TFRP). Always treated as a priority classification on the Service's proof of claim, unless entitled to a secured position if valid lien on file.
Person As used for bankruptcy purposes, includes an individual, partnership, and corporation, but not a governmental unit (11 USC § 101(41)).
Petition Date The date the bankruptcy petition was filed in the bankruptcy court.
Plan of Reorganization A proposed method of payment submitted by the debtor and/or other interested parties in a bankruptcy case to the bankruptcy court and creditors for review and approval. Creditors have the right to vote to accept or reject the plan. Plans are filed in Chapters 11, 12, and 13 bankruptcy proceedings.
Post-Confirmation The period that occurs after the plan is confirmed.
Postpetition The period after the bankruptcy petition is filed.
Postpetition Pre-Confirmation The period from the petition date to the confirmation date.
Postpetition Taxes Taxes incurred after the filing of the bankruptcy petition for tax periods ending after the petition date.
Preference A prepetition transfer of the debtor’s property to a creditor made on or within 90 days before the filing of bankruptcy (or one year if the transfer is to an insider), which enables the creditor to receive more than in a Chapter 7 liquidation. The trustee may avoid the transfer and recover the property for the estate unless one of several exceptions apply, including the exception for payments of debts made in the ordinary course of business (11 USC § 547). The voluntary prepetition payment by the debtor of trust fund taxes to the Service is not a payment of property of the debtor, and thus cannot be recovered as a preference.
Prepackaged Bankruptcies A bankruptcy which includes a plan of reorganization that the creditors negotiate and accept prior to the filing of the bankruptcy petition.
Prepetition The period of time before the bankruptcy petition was filed.
Prepetition Taxes Taxes incurred, whether or not assessed, prior to the filing of the bankruptcy petition for tax periods ending before the petition date.
Priority The concept relating to the order and the extent to which the various creditors' unsecured claims are satisfied out of the available assets of the bankruptcy estate (11 USC § 507).
Priority Claim A claim with priority over other unsecured claims. 11 USC § 507 sets forth the tests for priority claims, including taxes with return due dates less than three years prior to the petition date, income tax assessments made within 240 days before the petition date, income tax deficiencies that are unassessed but are assessable prior to the petition date, and trust fund taxes.
Proof of Claim A document a creditor files with the bankruptcy court to assert a right of payment from the bankruptcy estate for prepetition debts. A claim can also be filed for postpetition debts in some instances (e.g., § 1305 claims in Chapter 13).
Property of the Estate All legal or equitable interests of the debtor at the time the bankruptcy is filed. This includes potential claims and lawsuits the debtor may yet file against a third party. It is from this estate the trustee will liquidate assets to pay creditors (11 USC § 541). It also includes postpetition earnings in Chapters 11 (under BAPCPA) and 13 and certain after-acquired property in Chapter 7 ( 11 USC §§ 1306 and 1115).
Pro rata According to a calculated share; distributed proportionately.
Receivership See under term Bankruptcy.
Reorganization The process through which a Chapter 11, 12, or 13 debtor promises to resolve or pay creditors' claims.
Res Judicata The principle that an existing final judgment rendered on the merits by a court of competent jurisdiction is conclusive, and bars the parties from re-litigating the same claims in another proceeding.
Rule 2004 Examination Similar to a deposition but broader in scope. It permits any party in interest to examine any entity about the acts, conduct, or property of the debtor, the liabilities and financial condition of the debtor, or about any matter which may affect the administration of the debtor's estate, or the debtor's right to a discharge.
Schedules After a bankruptcy is filed, all debtors must timely file: (1) a schedule of assets and liabilities, (2) a schedule of current income and current expenditures, and (3) a statement of financial affairs.
Section 341 Meeting See First Meeting of Creditors.
Secured Creditor A creditor having a lien, security interest, or other encumbrance which has been properly perfected as required by law with respect to property owned by the debtor. The creditor has a secured claim to the extent of the value of the collateral or to the extent of the creditor's right to offset amutual debt owed to the debtor against the creditor's claim against the debtor (11 USC § 506(a)). For tax purposes, a properly filed Notice of Federal Tax Lien secures the tax liability up to the value of the equity in the assets. A federal tax liability may sometimes be secured because the Service has a setoff right against a debtor's right to federal tax refunds or overpayment of tax, or by amounts other federal agencies may owe the debtor.
Securities Instruments that evidence the holder's ownership rights in a firm (e.g., stock), the holder's creditor relationship with a firm or government (e.g., a bond), or the holder's other rights (e.g., an option).
Short Year Election The case in which an individual debtor (and spouse) have the option of filing short year income tax returns for the prepetition and postpetition portions of the tax year. This election applies to individual taxpayers who have filed a Chapter 7 or 11 bankruptcy case ( IRC § 1398(d) ).
Securities Investor Protection Act The law that establishes a plan of limited protection in proceedings where Security Investor Protection Corporation funds supplement assets of the member as provided by the act.
Small Business Case A Chapter 11 case where the debtor’s liabilities do not exceed $2,000,000 and no active creditor’s committee exists. Many, if not most, Chapter 11 cases will fall within this definition. The debt limitation must be adjusted every three years under 11 USC § 104 to reflect the Consumer Price Index.
Sovereign Immunity The doctrine that the United States is immune from suit for damages or other monetary recovery unless the United States waives its immunity from suit (e.g., by a statute permitting a damages suit against the United States).
Statutory Lien This attachment to a taxpayer’s property and rights to property for the amount of the liability arises when an assessment has been made; a demand for payment has been made; and the taxpayer must have neglected or refused to pay. (As a matter of IRS policy the taxpayer is normally given 10 days from notification to pay the amount due.)
Stock The outstanding capital of a company, the shares of a particular company, or the certificate of ownership of such stock.
Substitute for Return (SFR) A procedure by which the examination function of the IRS establishes an account and examines the records of taxpayer when the taxpayer/debtor refuses or is unable to file a return, and information received by the Service indicates a return should be filed. The Substitute for Returns (SFR) program under IRC § 6020(b) uses Statutory Notice of Deficiency (S/N) procedures (i.e., 30–day Letter and 90–day Letter).
Super Discharge For cases filed prior to October 17, 2005: The discharge granted to an individual debtor upon the successful completion of a Chapter 13 plan or to a corporation or a partnership upon the effective date of a confirmed Chapter 11 plan. All prepetition tax debts provided for in a Chapter 13 plan are discharged. In the case of a corporation or partnership in Chapter 11 that is not liquidating, all pre-confirmation debts, including administrative period taxes, are generally discharged.
Trustee In a case under Chapters 7, 12, or 13 the trustee is the officer appointed by the United States Trustee to administer the processing of a bankruptcy case. The trustee is the representative of the bankruptcy estate and owes fiduciary duties to unsecured creditors. In a case under Chapter 11, the debtor-in-possession (DIP) generally serves as the trustee unless the court orders a trustee be appointed.
Listed are several definitions of a trustee and the corresponding Chapter(s) of bankruptcy:
• Chapter 7 trustee: A disinterested person appointed by the United States Trustee or elected by creditors to administer the Chapter 7 case. Referred to as a panel trustee or case trustee. The Chapter 7 trustee is responsible for a particular Chapter 7 case.
• Chapter 11 trustee: A Chapter 11 trustee is responsible for a particular Chapter 11 case. The trustee is appointed by the court or who has been elected by the creditors to replace the debtor-in-possession. The DIP, or the Chapter 11 trustee, is a fiduciary responsible for administering the Chapter 11 case. The United States Trustee or a party in interest may request the court appoint a Chapter 11 trustee for cause.
• Chapter 12 trustee: An individual appointed to serve by the United States Trustee in every Chapter 12 case. Referred to as a Chapter 12 standing trustee.
• Chapter 13 trustee: An individual appointed to serve by the United States Trustee in every Chapter 13 case. Referred to as a Chapter 13 standing trustee.
Note: The Chapter 12 and 13 standing trustees are responsible for disbursement of payments under the plans for the respective bankruptcy chapters.
United States Trustee An employee of the Department of Justice charged with supervision of the administration of all bankruptcy cases (28 USC § 586). The United States Trustee has a statutory right to appear and be heard on any issue in any bankruptcy case (11 USC § 307).
Unsecured Creditor A creditor who has no perfected security interest in property of the estate to secure its claim, or no right of setoff, or to the extent the value of the creditor's collateral or right of setoff is less than the amount of the debt (11 USC § 506(a)). Unsecured creditors may be either priority or general unsecured creditors.
Unsecured Creditors Committee Appointed in Chapter 11 cases by the United States Trustee. The committee is comprised of creditors willing to serve, who generally hold the largest unsecured claims, and whose claims are representative of the type of unsecured debt in the case.
Unsecured General Claim A claim that is not entitled to either secured or priority status. General unsecured creditors may recover a low percentage on their claims or may recover nothing at all.
Violation of Stay An improper collection action made during the period in which the automatic stay is in effect. Examples of collection actions prohibited during the automatic stay (on prepetition tax liabilities) include the solicitation of an installment agreement, making demand for payment, or the serving of a levy. (However, giving notice and demand after assessment is not prohibited by the stay. 11 USC § 362(b)(9).) The Service can be liable for damages and attorneys fees for violations of the automatic stay, but punitive damages cannot be awarded. Also see Discharge Injunction.

Exhibit 5.9.1-2 (05-20-2008)
Acronyms and Abbreviations
Abbreviation Meaning
ACS Automated Collection System
ADJ Adjustment
ADS Automated Discharge System
AGI Adjusted Gross Income
AIS Automated Insolvency System
ALS Automated Lien System
AMT Amount
APOC Automated Proof of Claim
ASED Assessment Statute Expiration Date
ATTY Attorney
ATAT Abusive Tax Avoidance Transaction
AUSA Assistant United States Attorney
BAPCPA Bankruptcy Abuse Prevention and Consumer Protection Act
BC Bankruptcy Code
BD Balance Due
BK Bankruptcy
BMF Business Master File
C&F Call and Fax
CCFU Court Closure Follow-up
CFL Called Field Liaison
CNC Current Not Collectible
CONV Conversion
CPP Confirmed Plan Payment
CRDBAL Credit Balance
CSED Collection Statute Expiration Date
CT Credit Transfer
DI Debt Indicator
DISCH Discharge
DISCH DET Discharge Determination
DISM Dismissal
DOJ Department of Justice
DV Disclosure Verified
EIC Earned Income Credit
EIN Employer Identification Number
ENS Electronic Noticing System
EPOC Electronic Proof of Claim
ERISA Employee Retirement Income Security Act
ETP Estimated Tax Payment
FBAR Foreign Bank and Financial Account Report
FLD LSON Field Liaison
FLD SPEC Field Specialist
FMC First Meeting of Creditors
FP Full Pay
FPLP Federal Payment Levy Program
FRE&CLR Free and Clear
FS Filing Status
FTD Federal Tax Deposit
FU Follow Up
FWDTF Forward to Field
IA Installment Agreement
ICS Integrated Collection System
IDRS Integrated Date Retrieval System
IIP Integrated Insolvency Program
IMF Individual Master File
IRC Internal Revenue Code
IRM Internal Revenue Manual
LAMS Litigation Account Management System
LCBM Left Callback Message
LRF Last Return Filed
LTS Litigation Transcript System
MAN R Manual Refund
MFT Master File Tax
MOT Motion
NAN No Action Needed
ND CLM Need to File Proof of Claim
NDS Non-Debtor Spouse
NFTL Notice of Federal Tax Lien
NL No Liability
NMF Non Master File
NOA Notice of Assets
NOD Notice of Dividends
NOH Notice of a Hearing
OBJ 2 CLM Objection to Claim
OI Other Investigation
OIC Offer in Compromise
P & I Penalty and Interest
PDTN Penalties dischargeable, Tax Is Not
PIT Potentially Invalid TIN
PMI Per Manager's Instructions
PMT DET Prompt Determination
POC Proof of Claim
PP or POST Postpetition
PYMT or $ Payment
RESGN FLD SPEC Reassigned to Field Specialist
RIM Received in mail
RO Revenue Officer
ROL Release of Levy
RQ Request
RVU Reviewed
SAL/RE Sale of Real Estate
SAUSA Special Assistant United States Attorney
SSN Social Security Number
SIPA Security Investor Protection Act
TAO Taxpayer Assistance Order
TC Transaction Code
TCFTP Telephone Call from Taxpayer
TCFNDS Telephone Call from Non-Debtor Spouse
TEFRA Tax Equity and Fiscal Responsibility Act
TFRP Trust Fund Recovery Penalty
TIN Taxpayer Identification Number
TOP Treasury Offset Program
TP Taxpayer
TTEE Trustee
TTR Trustee Turnover Request
TY Tax Year
UP Unpostable
UR Unfiled Return
URP Underreporter Program
USC United States Code
UT Untimely
VOS Violation of Automatic Stay
WD Withdraw
XREF Cross Reference
4MGR APP For Manager's Approval

Exhibit 5.9.1-3 (03-01-2006)
Case Assignments
Cases may be assigned to the CIO or Field Insolvency based on chapter type, tax liability, and complexity. Some cases will necessarily flow back and forth between Field Insolvency and the Centralized Insolvency Operation.

Assignment of work duties between Field Insolvency and the CIO may change due to resources or workload upon mutual agreement among the Insolvency Area Managers and the Centralized Insolvency Operations Manager.

IF ... THEN...
the taxpayer files under Chapter 13, • Centralized Insolvency will process bankruptcy notifications, run IIP, status reports, PIT reports, and LTS reports before assignment to the Field Insolvency group where the bankruptcy is pending. After court closure, the CIO will complete closing actions.
• Field Insolvency will prepare original and amended proofs of claim using APOC as appropriate, review the plan and prepare referrals if needed, add the confirmed plan to the AIS Payment Monitoring screen, assign the case to the CIO for monitoring, and resolve cases involving defaulted plans or postpetition issues.
the taxpayer files under Chapters 9, 11, or 12, • the CIO will process bankruptcy notifications, run IIP, status reports, and work PIT reports before assignment to the Field Insolvency group where the bankruptcy is pending.
• Field Insolvency will prepare original and amended proofs of claim using APOC as appropriate, review the plan and prepare referrals if needed, add the confirmed plan to the Compliance Payment Program, monitor plan payments after confirmation, work LTS reports, recommend actions on defaulted plans, and perform all closing actions (except MFT 31 transfers) upon completion of the plan.

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