File your Taxes on Time if Planning to Declare Bankruptcy

Bankruptcy Attorney Dayton, Oh

If you’re struggling with taxes, you should know that declaring bankruptcy can eliminate, but only some types of taxes and only if you file your taxes on time prior to declaring bankruptcy. The US Bankruptcy court has very specific rules that must be filled in order for a debtor to successfully discharge their debt.

Tax Requirement for Bankruptcy

In order to qualify for a Chapter 13 bankruptcy discharge at the end of your bankruptcy cased you must have filed a tax return for the debt you wish to discharge at least two years before bankruptcy. Your income tax return records are necessary for the bankruptcy trustee to review as they offer valuable insight into income and expense information. If it wasn’t necessary to file due to not working or other valid reasons, you may need to write a brief statement for the trustee. Additionally, having your tax returns ensures that you are paying the correct amount for your Chapter 13 repayment.

Types of Tax Debt that is Dischargeable

You can only discharge tax debt that is three years old and derives from income tax debt. Newer tax debt or taxes from payroll or fraud penalties aren’t eliminated during bankruptcy. Any other priority debt must also be paid back over the course of your Chapter 13 bankruptcy repayment plan.

Income Tax Returns and Bankruptcy

Not filing tax reruns could mean that you won’t be able to discharge your debt at the conclusion of your bankruptcy, but there are exceptions depending on where you file and what chapter of bankruptcy you are attempting to file. Tax returns are another excellent reason to enlist the aid of a bankruptcy attorney in Dayton to relieve your debt. Some courts consider filing a late return the same as not filing at all and will not allow you to discharge your tax debt. Additionally, you may be able to get more favorable terms on taxes that you can’t discharge using bankruptcy protection.

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