If you’re filing bankruptcy, chances are, you’re low on funds, and an income tax return could be a welcome financial relief. But how will the bankruptcy process affect your return? Generally, the kind of bankruptcy chapter you file will be a significant factor in determining whether or not you should submit your taxes first. Here’s how taxes can impact a Chapter 7 or Chapter 13 bankruptcy.

How does your tax return affect Chapter 7 & Chapter 13?

While Chapter 7 bankruptcy eliminates most debts through liquidation of assets, Chapter 13 requires a repayment plan to pay off debts. Filing bankruptcy typically won’t have a direct effect on your tax returns, but it can affect your tax refund.

When filing under Chapter 7, the trustee will check your most recent tax return and determine if you’re due for a tax refund. If your refund is not an exempted property, you can use it to pay off your debts. However, you can use your tax return to claim a refund, then use the money for necessary expenses before you file bankruptcy.

Unlike in Chapter 7 bankruptcy, a Chapter 13 case will require you to provide your most current tax return instead of just the last return you filed. In other words, you have to update your returns before filing bankruptcy under Chapter 13. You must submit the four most recent tax returns to your trustee for the court to approve your repayment plan.

If you fail to file your tax return on time, the trustee can file a motion to give you a short period to do so. However, missing this deadline means the court will likely dismiss your bankruptcy case.

What happens if you file your taxes after filing bankruptcy?

filing bankruptcyWhether you are filing bankruptcy under Chapter 7 or Chapter 13, filing your tax returns afterward can influence how debts will be treated. Your unfiled taxes might not be included in the list of Chapter 7 dischargeable debts, or they can’t be paid off through your repayment plan in Chapter 13. Although you’re only required to furnish a copy of your most recent tax return under Chapter 7, the court may still ask you to file copies of outstanding tax returns.

This is mainly if you haven’t filed returns for about three years or so. In a Chapter 13 bankruptcy, unfiled tax returns within the four years before the date of your bankruptcy filing can result in your case being dismissed.


Aside from helping you with filing bankruptcy, the experienced attorneys at Sippel Law Firm PLLC in Kingman, AZ, can give you sound advice on your tax debt. They also provide services in will and trusts, probate law, and elder law. Call their office today at (928) 753-2889 to discuss your case, or visit their website to get in touch with them online.