The anticipation of the holiday season is often followed by the dread of tax season. If you plan to file bankruptcy, whether Chapter 7 or Chapter 13, the timing of your filing could have a drastic impact on how much of your income tax return you get to keep and how much of it becomes part of your estate for bankruptcy purposes. Laws have changed recently on bankruptcies so before you file, make sure to obtain the advice of a professional so that you maximize the benefit of the new laws.
How to Handle Bankruptcy and Taxes
Most people don’t intend to be unable to pay their bills. However, job loss, debt from medical bills, illness, and a host of other unforeseen circumstances can render you unable to meet your monthly obligations. When this happens, a Chapter 7 or Chapter 13 filing may be a way for you to eliminate creditor harassment and start to regain your financial freedom. Since some assets are excluded from your estate for filing purposes, including any earned income credit received on your taxes and some other tax credits, you need to be very familiar with the laws. Depending on the time of year you file, you may be entitled to some, most or all of your income tax return, but the laws are very specific. For these reasons alone, it’s imperative to have the advice of a professional before you file your income taxes and your chapter 7 or Chapter 13.
Some specifics on current bankruptcy laws include:
- Tax refunds from the previous year are part of the estate.
- Tax refunds for the year you file are part of the estate for income earned before you file.
- Tax refunds for the year after you file are yours.
- Not all debts are dischargeable in Chapter 7 or Chapter 13 proceedings.
- You might not be able to pay down on debts for a period before you file or after you file.
- Homes and autos may be retained depending on the type and number of them.
You must be current on your income taxes and filings. Failure to file your tax return and pay your current tax liability may jeopardize the success of your case. Some income tax debt may be dischargeable.
Starting the new year with less stress
Eliminating creditor harassment and starting with a new financial slate can help you ease through tax season. A plan to reorganize your future finances can help you avoid the financial morass that causes so much stress and can help you maintain your financial freedom.
If you live in Georgia and are in financial trouble, if you can’t meet your monthly obligations or if you are barely making the minimum payments, call our office in Savannah, Georgia. We’re a small law firm so you’ll get personalized attention from our family oriented staff. We want to help you get out of debt and stay on a good financial track in the future. We’ll show you how to maximize your finances each month and our innovative team can help you reap all the legal benefits to which you’re entitled. We’ve helped many Georgia residents improve their finances, regain their financial independence, reduce their stress level, and be able to enjoy their holidays once again.
Find out more about Bankruptcy in our guide: All About Bankruptcy
Learn about the ways bankruptcy can help you. Contact us for a free consultation by clicking here or calling (912) 351-9000. We’re here to help you gain the financial freedom you deserve.
The Law Offices of Barbara B. Braziel proudly serves the greater Savannah, GA area.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.