Should I File My Tax Returns Before Bankruptcy?
One of the most important things to understand about bankruptcy is that it is a process filled with implications before, during and after you file. Chief among them is what to do about your taxes – namely, do you file your tax returns before you file for bankruptcy, or do you hold off? The answer to that question requires you to keep a few key things in mind.
Taxes and Chapter 7 Bankruptcy
Generally speaking, the reason why someone would file their tax returns prior to filing for Chapter 7 bankruptcy protection is in an attempt to keep any refund that they’re entitled to. Depending on the amount of money that you’re owed by the government, you may be able to get your refund declared “exempt” – which means that it won’t be immediately taken from you in an effort to pay off your creditors.
You could also use something commonly referred to as a “wildcard exemption” to protect your refund in Chapter 7 bankruptcy, but you can’t actually do this unless you’ve already filed your taxes and know how much money you’ll be expecting.
Taxes and Chapter 13 Bankruptcy
In the event that you’re filing for Chapter 13 bankruptcy, you don’t actually have a choice regarding whether or not you should file your tax returns before the process begins. Under the law, you are required to file all tax returns for four full years prior to the date of your 341 hearing, which is when you will meet with creditors to discuss your situation. Any tax returns that have yet to be filed will normally send up red flags, because this could mean undisclosed refunds or it could translate to any other important financial information missing from your bankruptcy proceedings.
Trusted Georgia Bankruptcy Attorneys
Bankruptcy can be a complicated process, but it’s important to understand that this is a road you do not have to travel alone. To find out more information about your tax returns and bankruptcy, or to get answers to all of your other important bankruptcy-related questions, don’t delay – contact Clark & Washington today for more information.