How does chapter 7 bankruptcy affect taxes? 19 Answers as of January 21, 2013

I am thinking of filing chapter 7 bankruptcy and was wondering how that affects the end of year tax filing how do you file and what happens?

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Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
If you get a refund, the trustee will likely look to taking it and giving it to your creditors.
Answer Applies to: Washington
Replied: 8/10/2011
The Northwest Debt Relief Law Firm
The Northwest Debt Relief Law Firm | Thomas A McAvity
Depending on the availability of exemptions in your state to protect your refund, you may end up losing a significant portion of it when you get your refund next year.
Answer Applies to: Oregon
Replied: 8/9/2011
Law Office of John C. Farrell, Jr.
Law Office of John C. Farrell, Jr. | John C. Farrell, Jr.
All or a portion of your tax refunds can be considered part of your assets which the bankruptcy trustee can convert into cash to pay your creditors. You should consult with your bankruptcy attorney regarding any exemptions.
Answer Applies to: Massachusetts
Replied: 8/9/2011
Rhonda R. Werner Schultz, PL
Rhonda R. Werner Schultz, PL | Rhonda R. Werner Schultz
Any tax refund you receive is an asset of the bankruptcy estate. You will need to see if this qualifies for any of the exemptions in order to keep it. If it does not qualify, the bankruptcy trustee can take the refund and pay your creditors. Timing is everything on a filing where you expect a refund as you can use the refund for necessary living expenses, or a bankruptcy attorney's legal fees in order to avoid losing the refund in the bankruptcy. If you owe taxes for the current year, they will be given priority and will not be discharged in the bankruptcy. Certain taxes can be discharged, but a very careful look at the taxes must be done to see if they qualify for discharge in your chapter 7 bankruptcy.
Answer Applies to: Wisconsin
Replied: 8/9/2011
Lake Forest Bankruptcy
Lake Forest Bankruptcy | Anerio V. Altman, Esq.
Ultimately it is fine, but you will need to see an accountant. It is not a difficult issue because any debt discharged in Bankruptcy doesn't create a taxable gain for you. There is a form, 982, that the accountant should fill out and supply with your return.
Answer Applies to: California
Replied: 8/9/2011
    Goldsmith & Guymon
    Goldsmith & Guymon | Marjorie Guymon
    A tax refund is not an exempt asset, so if you are anticipating a refund check it may be intercepted by the bankruptcy trustee assigned your case. Filing bankruptcy is not a taxable event, so there would be no tax liability created in filing.
    Answer Applies to: Nevada
    Replied: 8/8/2011
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    For an individual it will have no effect.
    Answer Applies to: California
    Replied: 8/8/2011
    Indianapolis Bankruptcy Law Office of Eric C. Lewis
    Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
    For one, filing bankruptcy does not create the taxable "forgiveness of debt" that other debt settlement agreements create. In many jurisdictions, including Indianapolis Bankruptcy, your tax refund(s), if any, may be in part, or in whole, part of the bankruptcy estate. Each individual's situation is unique.
    Answer Applies to: Indiana
    Replied: 8/8/2011
    The Port Law Firm
    The Port Law Firm | Edward Port
    The filing of you bankruptcy has no affect on the preparation or timing of filing your 1040 income taxes. If you file bankruptcy you will prepare your taxes as you have previously done.
    Answer Applies to: Florida
    Replied: 8/8/2011
    Charles Schneider, P.C.
    Charles Schneider, P.C. | Charles J. Schneider
    Affect is to broad a question to answer. You should ask a more specific question.
    Answer Applies to: Michigan
    Replied: 8/8/2011
    R. Steven Chambers PLLC | R. Steven Chambers PLLC
    If you are entitled to a refund for the year in which you file, that refund is pro-rated between you and the trustee based on your filing date. For example, if you file on September 30, that is of the year that has passed before you filed, so the trustee is entitled to of your refund and you are entitled to the rest.
    Answer Applies to: Utah
    Replied: 1/21/2013
    Colorado Legal Solutions
    Colorado Legal Solutions | Stephen Harkess
    A bankruptcy filing does not affect future taxes. Discharged debt is not taxable. At the end of the year you will file your tax return the same as always.
    Answer Applies to: Colorado
    Replied: 8/8/2011
    Heupel Law
    Heupel Law | Kevin Heupel
    Bankruptcy is not a taxable event so there is nothing that you would do in regards to an upcoming tax return in the event you file bankruptcy this year.
    Answer Applies to: Colorado
    Replied: 8/8/2011
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