Tis that time of year. Tax season.Therefore, I thought this might be a good topic to cover.
First, unfiled tax returns make the task of proving your income much harder or at least not as easy as supplying the tax returns. As part of your bankruptcy filing you need to disclose your income. This is accomplished through a document known as a Statement of Financial Affairs. This documents requires you dislcose your income over the last three years. The easiest way to do this is to use your tax returns. Without your returns the job is much more difficult.
What if I’m filing Chapter 13 Bankruptcy
Secondly, Maryland indivduals filing for chapter 13 bankruptcy who have not filed their returns in the four years before filing for bankruptcy will run into problems. Section 11 USC 1308 of the US Bankruptcy Code requires you to file all tax returns due in 4 tax years immediately prior to the the filing of your bankruptcy case. While you can get away with this requirement on the day of filing in Maryland, the tax returns have to be filed by your meeting of creditors. Failure to file will severely delay the processing of your case. The court appointed trustee will need these documents to asses your case and until he/she has them your case will be stuck.
Unfiled Tax Returns and Chapter 7 Bankruptcy
Similarly, Maryland individuals filing under chapter 7 may have problems if they haven’t filed their tax returns for the past year. Section11 USC 521(e) of the US Bankruptcy Code requries that individuals provide the case trustee with a copy of your most recent tax return at least 7 days before the meeting of creditors. Once again, failure to do so will unnecessarily delay your case.
Finally, if having your case proceed smoothly and expeditiously is not incentive enough, you should know that some taxes are dischargeable. Therefore, filing your returns on time could be critical to getting rid of significant debt. Dischargeability of taxes is a complex issue and should be addressed in a separate posting.
For those getting an income other than Social Security Benefits filing all the required tax returns answers a lot of questions and provides the proof of income needed to go through the bankruptcy process.In addition, it is a smart move to know whether you owe or not because this impacts your reorganization planning in a chapter 13 or your step towards a fresh start in a chapter 7.
If you are a Maryland resident with questions about bankruptcy call me 410-849-9529.
Disclaimer: This article is provided for informational purposes only and should not be construed in any way as legal advice. This article does not create an attorney-client relationship.