Richard W. Piland, Jr.

UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
In re:
RICHARD W. PILAND, JR., Chapter 7
Debtor. Case No. 25-50725
MEMORANDUM OPINION
The question in this case is whether the debtor has primarily consumer debts. The dispute
turns on whether certain tax debt that the Internal Revenue Service (IRS) has designated as
currently not collectible is counted in the determination of the amount of debt. The Court finds the
tax debt is counted in the calculation of total debt even if the IRS labels some of the debt as
currently not collectible and concludes the debtor does not have primarily consumer debts.
JURISDICTION
This Court has jurisdiction over this bankruptcy case under sections 1334(a) and 157(a) of
Title 28, the delegation made to this Court by Order of Reference from the District Court entered
on December 6, 1994, and Rule 3 of the Local Rules of the United States District Court for the
Western District of Virginia. The dispute in this bankruptcy case requires the Court to rule on a
creditor’s motion to conduct examinations under Rule 2004 of the Federal Rules of Bankruptcy
Procedure, which in turn requires the Court to decide whether the debtor has primarily consumer
SIGNED THIS 30th day of April, 2026
THIS ORDER HAS BEEN ENTERED ON THE DOCKET.
PLEASE SEE DOCKET FOR ENTRY DATE.
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debts for purposes of Bankruptcy Code section 707(b). The assessment is necessary before the
Court may determine whether the granting of a chapter 7 discharge may be presumptively abusive.
Hence, this matter is a core proceeding under section 157(b)(2)(J) of Title 28.
PROCEDURAL HISTORY
Richard Piland, Jr. filed a chapter 7 bankruptcy petition in this Court. See ECF Doc. No. 1.
On his schedules, he listed Westlake Legal Group, PLLC (“Westlake”) as a creditor. See id.
Westlake filed a motion to conduct examinations of the debtor and his wife pursuant to Rules 2004
and 9016 of the Federal Rules of Bankruptcy Procedure. See ECF Doc. No. 10. The debtor objected
to the motion. See ECF Doc. No. 15.
At the hearing on Westlake’s motion, Westlake said that the purpose of the Rule 2004
examination was to determine whether the granting of a discharge is presumptively abusive under
Bankruptcy Code section 707(b)(1). Because section 707(b) applies only to debtors whose debts
are primarily consumer debts, the Court determined that the threshold issue for purposes of
adjudicating Westlake’s motion was whether Mr. Piland’s debts are primarily consumer debts.
The Court continued the hearing to permit the parties to file briefs and other documents on
the issue. See ECF Doc. No. 25. Both parties filed supplemental briefing on the discrete issue. See
ECF Doc. Nos. 29, 35, 36. The Court held the continued hearing, during which counsel for
Westlake and Mr. Piland appeared and were heard.
ANALYSIS
Section 707(b)(1) of the Bankruptcy Code authorizes the court, on its own or on a motion
by a party in interest, to dismiss a chapter 7 case or convert it if granting relief would be an abuse
of the provisions of chapter 7. 11 U.S.C. § 707(b)(1). Critically, for purposes of this dispute,
section 707(b)(1) applies only to an individual debtor whose debts are “primarily consumer debts.”
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See id. A “consumer debt” is defined as “debt incurred by an individual primarily for a personal,
family, or household purpose.” Id. § 101(8). “[T]he majority of courts that have considered the
issue have concluded that a debt for unpaid income taxes is not in the nature of a ‘consumer debt’
under § 101(8).” In re Stovall, 209 B.R. 849, 853 (Bankr. E.D. Va. 1997); see also IRS v. Westberry
(In re Westberry), 215 F.3d 589, 591 (6th Cir. 2000) (holding that tax debt was not a consumer
debt for purposes of 11 U.S.C. § 1301). The burden rests on Westlake as the moving party to
establish a prima facie case of abuse under section 707(b). See In re Williams, 424 B.R. 207, 210
(Bankr. W.D. Va. 2010) (citing In re Meade, 420 B.R. 291 (Bankr. W.D. Va. 2009)).
The debtor’s Schedule F reflects consumer debts totaling $140,674.30, which is undisputed
by the parties, and Schedule E identifies income tax obligations owed to the IRS and the
Commonwealth of Virginia. See ECF Doc. No. 1. The debtor has not filed federal or state income
tax returns since 2013. In lieu of filed returns, the IRS prepared a Substitute for Returns (“SFR”)
for tax years 2013, 2014, and 2016–2019. No SFR has been prepared for tax years 2015 or 2020–
2024. In support of his position, the debtor submitted official IRS account transcripts for tax years
2013 through 2024. See ECF Doc. No. 39. These transcripts bear IRS tracking numbers and reflect
the IRS’s records of assessed liabilities, transaction histories, interest accruals, and collection
activity for each tax year.
The IRS account transcripts establish the following assessed federal income tax liabilities
as of the petition date, with no liability assessed for years 2015 or 2020–2024:
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Tax Year Balance Plus Accruals
2013 $36,861.81
2014 $18,163.08
2015 $0.00
2016 $19,519.01
2017 $27,716.74
2018 $28,236.97
2019 $26,594.30
2020 $0.00
2021 $0.00
2022 $0.00
2023 $0.00
2024 $0.00
Total Assessed Federal Tax Liability $157,091.91
The Commonwealth of Virginia assessed an income tax liability of $2,150.91 for tax year
2019. Based on the exhibits filed with the Court, the debtor’s total tax debt as of the petition date
was not less than $159,242.82, which exceeds the debtor’s undisputed consumer debt of
$140,674.30.
Westlake challenged the debtor’s IRS account transcripts for years 2013 and 2014 asserting
that those transcripts reflect a zero balance and a notation that the accounts are not collectible.
Specifically, Westlake notes that both transcripts show a transaction code 520 and a corresponding
explanation of transaction described as “Bankruptcy or other legal action filed” with a date and the
figure zero under the column for “amount.” See ECF Doc. Nos. 39-1, 39-2. Westlake notes that
the transcripts also show a transaction code 530 explained as “Balance due currently not collectible
not due to hardship” with a date and the figure zero in the amount column.
Westlake relies on the code 530 transaction entries (“Balance due account currently not
collectible – not due to hardship”) displayed under the transaction history in the IRS transcripts
for tax years 2013 and 2014 to argue that the liabilities for those years are either uncollectible or
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zero and therefore should not be included in the calculation for purposes of section 707(b). The
Court is not persuaded by Westlake’s argument. The figure zero in the entry does not establish that
the liability is zero. Instead, it is a notation used in the transaction history when an entry reflects
an account status rather than a dollar-value transaction; it does not represent the balance of the
account. The transcripts themselves confirm this: interest and penalties continued to accrue after
the code 530 entries, as reflected by subsequent code 196 entries. Interest cannot accrue on a
balance of zero. Not only that, but the transcripts disclose that the account balance plus accruals is
$36,861.81 for the tax period ending 12-31-2013, and the account balance plus accruals is
$18,163.08 for the tax period ending 12-31-2014. The header section of each transcript states
unambiguously “Account balance plus accruals (this is not a payoff amount).”
Nor does the code 530 designation render the underlying liability uncollectible in any
legally meaningful sense. An administrative determination that an account is not collectible does
not extinguish or reduce the underlying tax obligation. In any event, both accounts include
subsequent code 537 entries reflecting that the IRS itself designated each account as “currently
considered collectible” prior to the petition date.
Notwithstanding the IRS’s administrative notation used on the transcripts, the underlying
tax liability remains a valid legal obligation of the taxpayer and constitutes a debt. A “debt” is
defined under the Bankruptcy Code as a “liability on a claim.” 11 U.S.C. § 101(12). A “claim” is
a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured.” Id. § 101(5)(A). Notably absent from the definition of “claim” is any reference to
collectibility or enforceability.
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In this case, the debtor’s tax liability for years 2013 and 2014 constitutes a valid obligation
regardless of whether the IRS suspended active collection efforts and designated the account as
“currently not collectible” under an administrative code 530 designation. An IRS determination
that an account is not collectible is an exercise of administrative discretion and does not eliminate
the underlying assessed obligation. See Midland Funding, LLC v. Johnson, 581 U.S. 224, 229
(2017) (“[Section 101(5)(A)] makes clear that the unenforceable claim is nonetheless a ‘right to
payment,’ hence a ‘claim,’ as the Code uses those terms.”). In other words, the existence of an
affirmative defense does not render the right to payment nonexistent. See id. Accordingly, because
the 2013 and 2014 IRS tax liabilities are properly counted in calculating the debtor’s non-consumer
debts, the Court concludes that Mr. Piland’s debts are not primarily consumer debts.
CONCLUSION
For the reasons explained in this opinion, the debtor does not have primarily consumer
debts. Because his debts are not primarily consumer debts, section 707(b) does not apply to this
case. Westlake’s sole basis for seeking an examination under Rule 2004—to determine whether
the presumption of abuse arises under the means test—is mooted by the Court’s determination that
section 707(b) is inapplicable to this case. The Court will issue a separate order consistent with the
conclusions in the opinion.
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