The Inconsistent Treatment Of Secured Tax Claims In Liquida

Document Type


Publication Date

Fall 1988




Commercial Law League of America




There is general inconsistency and tension regarding the treatment of secured tax claims under the Bankruptcy Code. In order to resolve the ambiguity and tension in the Code, tax claims for the same periods should be treated alike regardless of whether one taxing authority has filed a notice of lien in the appropriate public records office or whether such claims are asserted in a reorganization or liquidation proceeding. Some of the rights and priorities associated with tax liens outside of bankruptcy must be limited so as not to harm 2 basic goals of the reorganization process. These are: 1. equitable distribution of the debtor's assets among all creditors, and 2. giving the debtor a chance for a fresh start. Some differences in the treatment of claims reflect deliberate policy choices by Congress. It does not appear that the facilitation of tax collection was a paramount concern of Congress in enacting the Bankruptcy Code. A more systematic and consistent approach to the treatment of tax claims is needed by both Congress and the courts.

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