The U.S. Bankruptcy Code is nothing you have to learn. Wynn at Law, LLC studies it to offer you the best legal guidance for your particular situation. For example, we don’t provide tax advice, but for a bankruptcy filing you’re required to have income tax returns filed for the taxable period the year leading up to the date of your bankruptcy case. It’s a good idea to have four years of preceding income tax returns as well.
It’s early in the year. You don’t have to have them done before meeting with us, but you do have to have them completed before the filing. Without them, you’re up against that Code, and could run into some severe problems when filing bankruptcy under Chapter 13.
Same goes for a Chapter 7 filing. Wynn at Law, LLC doesn’t need your income tax return for our initial meeting, but we will need them to provide to the court and the case trustee. You may be required to file with the court copies of your tax returns that are past due, if you missed prior years. You may even be on the hook for filing future years’ returns with the court if you are filing a Chapter 13.
Here are two tips on timing that you should know:
First, if the IRS has already put a Federal lien on your property for debt you owe them, the lien remains after the bankruptcy filing. You will have to clear the lien before selling the property. Second, when you don’t file taxes before filing bankruptcy, that tax obligation won’t be discharged in a Chapter 7 and may not be distributed in Chapter 13. If you’re due a refund, it may be applied toward the debt you owe or you may be able to keep 100 percent, which is a good thing.
A quick note here: These are income taxes that are discharged in Chapter 7 or Chapter 13. If you owe penalties (fraud, early distributions, etc.) or payroll taxes, Chapter 7 doesn’t wipe those out.
*The content and material in this original post is for informational purposes only and does not constitute legal advice.