Opinion
Case No.: 02-851-3F7.
March 11, 2005
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case came before the Court upon Debtors' Motion to Value Tax Lien and Determine Lien Extinguishment Upon Payment. The Court conducted a hearing on the matter on August 18, 2004 at which the parties field a stipulation of facts with exhibits. By letter dated August 26, 2004, the Court informed the parties that it intended to deny the Motion. The Court instructed counsel for the Internal Revenue Service to prepare Findings of Fact and Conclusions of Law and an Order embodying the Court's ruling. Upon the evidence, the Court makes the following Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
Debtors filed a Chapter 13 bankruptcy petition on January 31, 2002. (Doc. 1.) On June 13, 2002 the Internal Revenue Service (the "IRS") filed a proof of claim, which the Clerk's office designated as Claim 11. On July 22, 2002 Debtors filed Objection to Claim 11. On September 17, 2002 the IRS filed Claim 13, which amended Claim 11. Claim 13 reflected that Debtors owed federal income taxes for 1994, 1995, 1996, 1999, 2000 and 2001, plus accrued interest to the petition date, totaling $131,952.36. Claim 13 included a secured claim of $108,614.96. On October 23, 2002 the parties submitted Agreed Order Overruling in Part and Sustaining in Part Debtor's Objection to Claim No. 11, as Amended of the Internal Revenue Service. The Agreed Order which provided that the IRS had a secured claim in the amount of $62,869.95, was not entered. On November 1, 2002 Debtors converted their case to Chapter 7. On August 19, 2004 the Court entered a discharge in the case.
A notice of federal tax lien covering Debtors' federal tax liabilities for 1994, 1995, and 1996 was recorded in the Duval County, Florida records on June 15, 1999.
The value of the secured claim set forth in the agreed order was the result of an agreement between the parties which was memorialized in a letter dated November 4, 2002 from the United States Department of Justice to Debtors' then counsel. (Debtors' Ex. 4.)
CONCLUSIONS OF LAW
Debtors seek to value their exempt assets which will not be administered by the Chapter 7 trustee at $49,621.61 and to pay that amount to the IRS in full satisfaction of the IRS' lien. The IRS asserts that Debtors are impressibly attempting to strip down a secured claim in a Chapter 7 case. A debtor is not permitted to "strip down" an allowed secured claim in a Chapter 7 case.Dewsnup v. Timm, 502 U.S. 410, 417 (1992). The Supreme Court inDewsnup refused to hold that Congress intended to depart from the pre-Code rule that liens pass through bankruptcy unaffected. The Court explained that the effect of allowing a debtor to used § 506(d) to void the line would improperly freeze the creditor's secured interest at the judicially determined value. The holding in Dewsnup has been extended to include non-consensual federal tax liens. See In re Carpenter, 2003 WL 1908944 (March 14, 2003); In re Thomas, 260 B.R. 844, 845 (Bankr. M.D. Fla. 2001);Phillips v. United States of America (In re Phillips), 197 B.R. 363, 366 (M.D. Fla. 1996). The fact that the taxes in question have been discharged does not change the result. Unless they are avoidable under the Bankruptcy Code, liens and the in rem claims they represent survive a bankruptcy discharge.Holloway v. John Hancock Mutual Life Ins. Co., 81 F.3d 1062, 1063 n. 1 (11th Cir. 1996).
Debtors assert that they are seeking to enforce the terms of the November 4, 2002 agreement between the parties. However, the agreement only determined the amount of payments under the Chapter 13 plan in a case in which Debtors were permitted to value a secured claim. The agreement did not require the IRS to relinquish its lien. Moreover, the Debtors converted their case to Chapter 7 prior to the entry of the Agreed Order.
The Court will enter a separate order consistent with these Findings of Fact and Conclusions of Law.