Is It the Right Time to File Bankruptcy After or Before the Tax Return?

Filing for bankruptcy might be confusing, and so is filing for taxes. Combing the two might become complex. But in general, it is always better and more convincing to complete the tax return before you file for bankruptcy. Here’s what you should learn:

Bankruptcy after the Tax Return -

If you file bankruptcy before the receipt of the refund & the refund isn’t exempt, it might be held until a refund is abandoned or administered by the trustee upon the refund’s receipt. So, when you think you will get the non-exempt refund, you might wish to file your tax return first. But when it’s about the exemption planning & pre-bankruptcy transactions, always discuss the needful with a bankruptcy attorney Brooklyn NY.

Filing for Taxes during, before, or after Chapter 7 -

In the chapter 7 of bankruptcy, a trustee gets appointed. The prime role of any trustee is to administer this case. However, sometimes, it also involves liquidating the non-exempt assets for the purpose of distributing funds. Note that the non-exempt asset might include the ultimate right to get a tax refund.

Filing for Taxes during, before, or after Chapter 13 -

Considering chapter 13, you get control over the assets. Also, you can learn how to pay back the creditors. Therefore, you might lose the tax refund but disclose the authority to get the refunds when the case is already filed.

The right to receive a refund on a filing date might impact how much is required for paying back because creditors should get the same in Chapter 13 when compared to chapter 7.

You should be up to date when it comes to filing for tax returns. It isn’t necessary for back tax returns to get filed before filing the bankruptcy petition. But when tax returns are not filed and don’t need any filing, chapter 13 plan might not be confirmed. So, the case will get eventually dismissed.

Outstanding tax debts might be offered in chapter 13. And often, taxes that aren’t paid in full in this chapter might be discharged. The income tax obligations rising in the last three or four years or obligations where the ultimate assessment happened within 240 years before the bankruptcy needs to be paid completely.