April 17th, this year’s deadline to file taxes, is just a few days away. Have you done your taxes yet?
As a Memphis bankruptcy lawyer, I always remind people this time of year that bankruptcy can help them take control of their tax debt. It depends on certain factors, such as how old the tax is and whether or not you filed on time, but the rules are quite simple to understand. Read the answers to some of the most common questions I get, and be sure to get those taxes in on time.
Can I discharge my tax debt in a bankruptcy?
A Chapter 7 bankruptcy offers full discharge of tax debts — meaning they are completely wiped out and you don’t have to pay them back. However, you need to have filed on time and the tax debt must be three years old. That means as of this Sunday, April 15th, taxes from 2014 are dischargeable in a Chapter 7.
Do I have to file my taxes to file for bankruptcy?
Yes, you are required to file your taxes and the bankruptcy court may request proof.
Do I have to file my taxes on time to file for bankruptcy?
If you’re filing a Chapter 7 bankruptcy — again, that’s the type of bankruptcy that allows you to get rid of unsecured debts like taxes and credit card bills without paying them back — you need to have filed on time in order for the debt to be discharged.
On the other hand, a Chapter 13 bankruptcy, which combines your debts into affordable monthly payments, could be an option for you if you didn’t file your return on time.
Are penalties and interest also dischargeable?
If your taxes are discharged in a Chapter 7, then the penalties and interest attached to them are dischargeable as well. Even if you’re combining the tax debts into monthly payments through a Chapter 13, bankruptcy stops additional penalties and interest from accruing.
If I filed for bankruptcy, do I have to do anything different on my tax return?
Nope. The vast majority of time time, filing your taxes after a bankruptcy is exactly the same process as it would be otherwise.
I hope these answers have clarified some of your questions. There’s one more question I often I hear: Can I use my tax refund to file for bankruptcy? I love hearing this question because, as a Memphis bankruptcy lawyer, I believe there’s no better use of your tax refund than buying your freedom from debt. Tax season is a wonderful time to clear your slate and get the peace of mind you deserve, which is precisely what bankruptcy offers.
When your refund comes in, call (901) 327-2100 to speak with a qualified Memphis bankruptcy lawyer or contact us here. We’ll look at your situation and discuss your goals — no strings attached. And remember, get those taxes in on time.