Should you file for bankruptcy before or after you file taxes? Your tax return plays an important role regardless of whether you are filing Chapter 7 or Chapter 13 bankruptcy. As your bankruptcy attorney would advise, being up to date is essential when it comes to appropriately addressing your debt responsibilities.

Chapter 7 Bankruptcy

Your bankruptcy attorney will advise you to have your tax returns up to date when filing for Chapter 7 bankruptcy. If you are owed a refund, you may actually be able to exempt it from bankruptcy proceedings, preserving that money for needed expenses. Current tax returns are also used to validate your income information provided in bankruptcy paperwork.

If you owe money to the IRS, however, having your tax returns up to date will ensure that debts from prior tax years are appropriately addressed during bankruptcy proceedings. Because a tax debt is considered a “priority debt,” it will be the first thing to be paid after your assets are liquidated in a Chapter 7 bankruptcy. However, only returns filed two years ago or earlier can be discharged.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, you will need to provide your four most recent tax returns, making it even more important to complete all paperwork on time. If you fail to file your returns before filing for bankruptcy, your case could be delayed by a motion from the trustee appointed to your case.

Missing the deadline for the motion could cause your case to be dismissed outright. The IRS could also file a substitute return that further complicates your debt situation. By ensuring that all tax information is up to date in a Chapter 13 bankruptcy, you will be able to include tax debts as part of your payment plan.

If you need a bankruptcy attorney, help with wills & probate, or advice on another legal matter, contact the team at Cronin Skilton & Skilton, P.L.L.C. With convenient locations in Nashua and Charles City, IA, their experienced attorneys will offer personalized service to help you appropriately resolve your legal concerns. To learn more about their practice areas or to schedule a consultation, visit them online or call (641) 435-2462.