Meeting with a bankruptcy lawyer can provide just the solution you’re looking for when dealing with insurmountable debt. However, there is often confusion as to whether it’s better to file before or after submitting a tax return. This is an important consideration, as it can make a difference in your eligibility and affect your ability to keep any refund you are due. Here’s what you need to know to plan your bankruptcy correctly. 

Chapter 7

When you file a Chapter 7 bankruptcy, your non-exempt assets will become the property of the bankruptcy estate so it can be used to pay back your creditors. This will include any tax refund you are owed unless you’re able to exempt it. Thus, if you file taxes first, it’s typically a good idea to spend your refund before having a bankruptcy lawyer complete your petition. The key is to make sure it’s used on necessary expenses and keep organized records of your purchases. 

Chapter 13

Regardless if you decide to go with a Chapter 7 or Chapter 13 bankruptcy, you must be up to date on all tax returns that have come due before you can file. For a Chapter 13, you will need to show the bankruptcy trustee returns for the last four years. Once you meet this requirement, your bankruptcy lawyer can advise you on how to use your bankruptcy to manage your tax liability. For example, while you’re in Chapter 13 bankruptcy, you can avoid incurring more interest or penalties on any dischargeable past-due taxes. Additionally, you will have the opportunity to satisfy an IRS tax lien and be forgiven of dischargeable taxes without making any payments.

Timing your bankruptcy right is essential to making sure you benefit from it as much as possible. If you are considering filing, a bankruptcy lawyer from Padgett & Robertson, Attorneys at Law can help explain your options. With more than 40 years of experience, they have guided countless Southern Alabama residents successfully through the process of achieving debt relief. For expert advice on which chapter will most effectively allow you to reach your financial goals, call (251) 342-0264 to set up a free consultation. You can also visit their website to learn more about the different types of bankruptcy available.

No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.

We are a debt relief agency. We help people file for Bankruptcy relief under the Bankruptcy Code.