The holiday season is over and now is the time when many Americans look in the mirror and ask themselves, “how am I going to pay for the gifts I bought?” Even though no licensed attorney would (or should) advise you to splurge on gifts and file bankruptcy immediately afterwards, some people try. But I digress…
Whether you’re about to file bankruptcy after months or planning, or whether you woke up this morning and had that “bankruptcy” feeling, you need to consider that filing at this time of year brings special income tax considerations.
Taxes and Chapter 7 Bankruptcy
If you’re thinking about filing for chapter 7, and if you expect to owe taxes, it is important for you (and your attorney) to plan accordingly.
First, the refund you are expecting may or may not be yours to keep. If you do not take the necessary steps to exempt your refund, then it may become an asset of the bankruptcy estate. That means that it will be used to pay your unsecured creditors, as in, NOT you. Also, if you fail to turn over your refund, then you might lose your ability to obtain a discharge.
By now you’re asking – so how do I know if I can keep my refund?
The answer is that it depends on the state you’re filing in. It also depends on the amount you are already trying to exempt from the bankruptcy estate. A good bankruptcy attorney will help you navigate this situation.
Taxes and Chapter 13 Bankruptcy
Keep in mind that tax returns must be provided in all chapter 13 cases. The debtor must have all tax returns filed for all tax years – this includes 2011. See Bankruptcy Code sec. 1308.
Section 1308 basically says that all chapter 13 debtors must have their tax returns filed before the creditor’s meeting. If not, the trustee may continue the meeting until it is filed – but only up to 120 days. And if it is still not, the case can be dismissed. Best practice is to avoid the delay altogether. Never let your entire case rely on an extension (either asking for one, or a request that has already been approved before you file).
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JAN
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A Unique Law Firm For A Unique Client Life is not as simple as black and white‚ nor are your needs and concerns. At Liss Law, LLC we understand that it’s the color in life that requires unique attention. We are a law firm dedicated to providing clients the best legal services and solutions available. REAL ESTATE: we represent clients in a broad spectrum of Real Estate matters; including residential and commercial conveyance, condo conversion and creation, zoning, permitting, Landlord/Tenant and Eviction. BANKRUPTCY: Consumer & Creditor- Everyday we continue to navigate individuals, small businesses, and creditors alike through a very trying economic climate. Our unparalleled comprehension and detailed knowledge of the Bankruptcy Code prepare us to assist you through this process.