Before filing for a Chapter 7 bankruptcy, it is important to understand how taxes will be affected. Bankruptcy can provide relief from overwhelming debt, including taxes, but there are some important considerations to keep in mind. Here is what you need to know about Chapter 7 & Taxes.
In a Chapter 7 bankruptcy, certain taxes may be discharged or eliminated as part of the bankruptcy process. These taxes include income taxes from returns due at least three years prior to bankruptcy filing, taxes assessed at least 240 days prior to filing, and taxes for which the tax return was filed at least two years prior to bankruptcy.
However, not all taxes are dischargeable in a Chapter 7 bankruptcy. Taxes owed for fraud, willful evasion, or failure to file tax returns, are not dischargeable, and must still be paid. Additionally, taxes owed for trusts fund recovery penalties, sales taxes and property taxes are also not dischargeable.
Even if taxes are dischargeable, they may still have a higher priority status in a bankruptcy case. This means that they will be paid before other debts in bankruptcy. For example, taxes owed for the current year, or taxes owed for the past three years, will have a higher priority status and will likely not be discharged.
To have taxes discharged in a Chapter 7 bankruptcy, it is important to meet certain filing requirements. This includes filing all the required tax returns, and providing proof of tax assessments and payment history. It is also important to accurately disclose all taxes owed on your bankruptcy petition.
Chapter 7 bankruptcies can provide relief from overwhelming debt, including taxes, but it is important to understand how taxes will be affected. Certain taxes may be dischargeable, while others may have a higher priority status and must still be paid. To have taxes discharged in a Chapter 7 bankruptcy, it is important to meet certain filing requirements and accurately disclose all taxes owed on the bankruptcy petition.
For people considering filing for Chapter 7 bankruptcy and have questions about how it can affect your tax, it is important to consult with an experienced bankruptcy attorney. An attorney can help you understand your options and guide you through the process, ensuring that you get the relief you need. For more information visit us at www.kansascitybankruptcy.com. At W M LAW, we are “Here to Help”.