Many people who need to file bankruptcy have other financial issues swirling around them as well, and taxes seem to loom the largest. Some have outstanding tax debts, whereas others simply haven’t filed tax returns in years. Depending on your mindset, this may or may not be a problem for you.

Income Disclosures In Your Bankruptcy Papers

As part of the Statement of Financial Affairs you’re going to need to account for your income over the past two years. That means you’re going to need to get your hands on that information, and tax returns are typically the fastest place to look. A lack of a completed return will surely make the task more difficult, but that’s easily fixable.

Income Tax Returns In Chapter 13 Bankruptcy

The problem in terms of filing bankruptcy, however, comes if you’re filing Chapter 13. Under the U.S. Bankruptcy Code (11 USC 1308) you’re required to have tax returns filed for all taxable periods ending during the 4-year period ending on the date of the filing of your bankruptcy case – and you’ve got until the day before your meeting of creditors to get it done. So if you’re behind the times, filing-wise, and don’t have everything lined up you’re going to run into some severe problems in a Chapter 13 scenario.

Depending on where you file for bankruptcy, your local rules may also require that you provide copies of tax returns to the trustee assigned to your case. Without those filed returns, the trustee may have a bone to pick with you – and that will ultimately go to the judge.

Income Tax Returns In Chapter 7 Bankruptcy

If you’re filing Chapter 7 bankruptcy then you may have problems if you haven’t filed your tax return for the past year.  Under the U.S. Bankruptcy Code (11 USC 521(e)) you’ve got until 7 days prior to the meeting of creditors to provide the case trustee with a copy of your most recent tax return.  If you’ve been diligent about your obligations this should be a snap, but if you’re sending along a 5 year old return yet showing current income then under  11 USC 521(f) you may be required to file with the court copies of your tax returns that are past due; you may also be required to file them with the court on a going-forward basis for some period of time.

Unfiled Income Tax Returns Mean No Discharge

On a larger scale, when you don’t file your tax returns prior to going into bankruptcy there’s going to be an issue with respect to how those debts are handled in the case.  Not only won’t unfiled tax debts be discharged in a Chapter 7, they won’t be paid out in a Chapter 13.   It’s a better idea to file your returns before walking into bankruptcy court so that your lawyer can help you deal with those potential obligations now rather than having them loom larger later.

Check Out These Related Posts:

  1. Can My Taxes Be Discharged In Chapter 7 Bankruptcy?
  2. Do You Need To File A Tax Return?
  3. Filing For Chapter 7 Bankruptcy Again
  4. Rapid Refund For Your Taxes? Think Again.
  5. Filing Alone vs. Filing With Your Spouse

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