subject: CC Brown law – Should You File Income Taxes Before or After Bankruptcy? [print this page] CC Brown law Should You File Income Taxes Before or After Bankruptcy?
Often people have queries concerning income tax bankruptcy courts, and if they gamble losing their redemption when filing for bankruptcy. Anyone who owes a large amount of unsecured debt may find relief by choosing to file for a Chapter 7 bankruptcy. However, qualifying for a Chapter 7 bankruptcy may be much more difficult since new laws were enacted in 2005. The Bankruptcy Abuse Prevention and Consumer Protection Act specifies that individuals must pass a "means test" to decide whether they are eligible to file for Chapter 7, also known as the liquidation bankruptcy.
Filing Income taxes Before Your Bankruptcy:
Preferring to file your tax return before or after bankruptcy is a common dubiousness most people have. Let's say that you file bankruptcy and have not yet filed your tax return. If you are due a refund, the bankruptcy trustee can able to confiscate that money. The court will view this as an asset, which can be used to pay your creditors. If the debtor is owed a refund for any year prior to filing bankruptcy, all of the payoffs are given to the bankruptcy court. However, if a married person files bankruptcy without their spouse, then only half of the refund will become the property of the bankruptcy estate.
Filing Income taxes After your Bankruptcy:
People who file their taxes and then receive a redemption may be at risk of not qualifying under the Chapter 7 means test. Your tax refund will be viewed as income, which may put you above the average median income. The courts will appraise the average amount of income the individual has earned during the past six months. They will take this figure and compare it to the median income of the state where the person resides. If the average income is greater than the median, they may have to file for Chapter 13 bankruptcy instead.
On certain occasions, you may wish to acquire your tax redemption at least six months prior to filing for bankruptcy. Debtors who choose this route should be careful about how they spend their tax refund check. For example, if you receive a large amount back from the government and then spend it buying a car, this will be considered an asset during bankruptcy. Therefore, you may want to use the money to pay everyday living expenses, such as food, housing or utility expenses.
Choosing to file for Bankruptcy is a scaring decision and one that requires expert legal advice. When you have a large amount of credit card debt and are unable to pay your monthly bills, this may be the right choice for your situation. In most cases, you can still keep your house and vehicle. Chapter 7 will let you to get rid of your unsecured debts so that you can make a fresh start. You should converse with a bankruptcy attorney to assess your case and make a legal recommendation that addresses your specific needs.
