October 18, 2017

Colorado Supreme Court: Claim Arose Prior to Filing Bankruptcy Petition and Therefore was Dischargeable

The Colorado Supreme Court issued its opinion in Hardegger v. Clark on Monday, October 2, 2017.

Contribution—Bankruptcy Discharge—Tax Withholding Liability—26 U.S.C. § 6672(d).

This case required the supreme court to determine when the right of contribution provided in 26 U.S.C. § 6672(d) (2012) gives rise to a “claim” under the U.S. Bankruptcy Code. Applying the “conduct test,” under which a claim arises for bankruptcy purposes at the time the debtor committed the conduct on which the claim is based, the court concluded that petitioner’s claim for contribution arose when the parties’ jointly owned company incurred federal tax withholding liability, rendering the parties potentially responsible for that debt. Because this conduct occurred before respondents filed their bankruptcy petition, the court concluded that petitioner’s claim constituted a pre-petition debt that was subject to discharge. Accordingly, the court affirmed the judgment of the court of appeals.

Summary provided courtesy of Colorado Lawyer.

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