by July 31, 2025 — The National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) filed an amicus brief in the Second Circuit in In re Goebel, No. 25-103, in support of a Chapter 7 debtor seeking a determination that over $500,000 in tax debts owed to the Internal Revenue Service (IRS) were discharged in bankruptcy. The amici urge the court to reject the IRS’s efforts to restrict the bankruptcy court’s ability to determine tax dischargeability and to reaffirm the rights of debtors to obtain a timely and final ruling on the scope of their discharge.
The Case Below
Laura Charlene Goebel filed for Chapter 7 relief in the Eastern District of New York. Her petition included over $500,000 in income tax debt owed for tax years 2008 through 2018. The IRS had issued lien and levy notices and entered into installment agreements for portions of the debt. Because the taxes were assessed more than three years before the petition date, and she had filed timely returns, the debts were presumptively dischargeable unless she had “willfully attempted to evade or defeat” the taxes under 11 U.S.C. § 523(a)(1)(C).
Before entry of her general discharge, Ms. Goebel filed an adversary proceeding under Rule 4007(b) seeking a determination that the IRS debts were discharged. The IRS moved to dismiss, arguing lack of ripeness and that the Declaratory Judgment Act bars the Bankruptcy Court from making determinations of dischargeability on federal taxes. The bankruptcy court denied the motion to dismiss and the district court certified the appeal for direct review by the Second Circuit.
IRS Position
The IRS argues that the bankruptcy court lacked jurisdiction to determine dischargeability because the dispute was not “ripe” at the time Ms. Goebel filed her complaint. According to the IRS, dischargeability is not justiciable until two events occur: (1) the debtor receives a discharge and (2) the IRS takes a post-discharge collection action or otherwise disputes dischargeability. The IRS further contends that the Declaratory Judgment Act, 28 U.S.C. § 2201(a), bars declaratory relief “with respect to Federal taxes,” and that this prohibition prevents bankruptcy courts from adjudicating dischargeability of tax debts in advance.
Debtor’s Position
Ms. Goebel argues in her brief that the Bankruptcy Code and Rules expressly authorize her to bring a dischargeability action “at any time,” and that there is no requirement that she wait until after discharge or after a collection effort. She maintains that the IRS’s interpretation would deprive debtors of meaningful access to the courts while they are still protected by the bankruptcy process and represented by counsel. Ms. Goebel also argues that section 106(a) of the Bankruptcy Code abrogates the government’s sovereign immunity and permits the bankruptcy court to issue binding determinations of tax dischargeability. Her supplemental complaint, filed after the IRS initiated its own action in district court, removed any lingering ripeness concerns.
NCBRC and NACBA Position
In their amicus brief, NCBRC and NACBA emphasize that:
- Bankruptcy courts have core jurisdiction to determine dischargeability under 11 U.S.C. §§ 523 and 157(b)(2)(I), and nothing in the Declaratory Judgment Act or Article III limits that authority.
- Congress expressly authorized debtors to initiate dischargeability proceedings “at any time” under Rule 4007(b), and courts have long held that such proceedings are justiciable without waiting for the IRS to act.
- The Declaratory Judgment Act does not apply to dischargeability actions because such proceedings are not declaratory in nature—they are determinations of substantive rights under the Bankruptcy Code and are specifically authorized by statute. Congress further abrogated sovereign immunity in § 106(a), making clear that governmental units, including the IRS, are subject to these determinations.
- The IRS’s position would undermine the fresh start by postponing litigation over dischargeability until after the bankruptcy case has closed, forcing debtors to defend themselves years later without the protection of the bankruptcy court.
The brief was prepared by Chad Husnick, David Foster, and Leah Davis Patrick of Kirkland & Ellis LLP. NCBRC and NACBA thank them for their hard work and dedication.