The Tax Court had jurisdiction to consider an individual’s deficiency case even though the individual had a Chapter 13 bankruptcy case pending at the time he filed the Tax Court petition. The individual filed a total of six bankruptcy petitions, all but one of which were subsequently dismissed. The second bankruptcy petition pending at the time the Tax Court petition was filed was instituted by the individual during the one year period preceding the filing of the Tax Court petition. The individual’s sixth bankruptcy petition was still pending at the time his Tax Court case was heard and decided.
CCH Comment. If a Tax Court petition is filed after a bankruptcy petition has been filed, then pursuant to 11 U.S.C. §362(a)(8) the automatic stay generally bars commencement of a Tax Court suit. The Tax Court lacks jurisdiction over the deficiency proceeding and must dismiss the case. Similarly, if a Tax Court petition is filed before the filing of the bankruptcy petition, then the automatic stay bars continuation of the Tax Court case. In that instance the case is not dismissed, but instead is stayed until either the bankruptcy stay is lifted or the case is closed, dismissed or results in the granting or denial of a discharge. While the filing of a bankruptcy petition generally gives rise to an automatic stay that bars the commencement or continuation of a Tax Court suit, there are a number of exceptions to the automatic stay. Moreover, the filing of a bankruptcy petition does not bar the IRS from issuing a statutory notice of deficiency to the bankruptcy debtor.
Because the individual filed two successive bankruptcy petitions in a one year period, the automatic stay with respect to any action taken with respect to the individual’s debt terminated 30 days following the filing date of second petition, pursuant to 11 U.S.C. §362(c)(3). The Tax Court deficiency case was found to be an action with respect to the individual’s debt. Accordingly, because the individual had previously filed a bankruptcy case that was dismissed prior to the filing of the Tax Court petition, and because the Tax Court petition was filed more than 30 days following the filing of the second bankruptcy petition, the automatic stay was lifted by the time the individual instituted the Tax Court proceedings.
CCH Comment. The automatic expiration of the automatic stay in a second bankruptcy case filed in a 12 month period, sometimes called an “exploding stay”, was added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 as way to curb debtors who repeatedly file, and later dismiss, successive bankruptcy petitions for the purpose of abusing the automatic stay.
Finally, the individual’s sixth bankruptcy petition, filed just prior to the time of the Tax Court considered the jurisdiction issue, did not bar continuation of the Tax Court case. Pursuant to 11 U.S.C. §362(c)(4)(A)(i), the automatic stay does not apply in any third or subsequent bankruptcy cases filed within one year of the filing of two or more bankruptcy cases that were previously dismissed.