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Should I declare bankruptcy before or after filing my taxes?

As tax season approaches, many Mississippians struggling with debt are wondering whether they should file bankruptcy before or after they file their taxes. It is generally advisable to file taxes before filing for bankruptcy; not doing so carries unique consequences for Chapter 7 and Chapter 13 bankruptcy cases.

After filing for Chapter 7 bankruptcy, a trustee who is responsible for collecting relevant information such as a copy of the filer's most recent tax returns will be assigned to the case. Filers have seven days prior to the meeting of creditors scheduled by the court to provide copies of their most recent tax returns. During a bankruptcy case, tax refunds may be issued to the debtor or they may be used to pay down their debts. However, unfiled tax debts will not be discharged and those who do not list their refund may lose their right to collect it once their bankruptcy case is over.

Although Chapter 13 focuses on the repayment of debt rather than discharge of debt in exchange for sale of nonexempt property, filers may also face consequences for not filing their taxes before filing for Chapter 13 bankruptcy. In accordance with Chapter 13 requirements, debtors must provide proof that they filed their state and federal income taxes for the past four years.

As with Chapter 7, Chapter 13 debtors must provide copies of their most recent tax returns at least seven days before the first meeting of creditors. If a creditor does not file their taxes prior to that date, they will not be able to list their refund in their schedule of assets and liabilities and they will consequently not be entitled to receive their refund. Therefore, debtors looking to get a fresh financial start by filing for Chapter 7 or Chapter 13 bankruptcy should generally file their taxes before declaring bankruptcy.

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Christopher G. Holt Attorney at Law
2501 14th St.
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Gulfport, MS 39501

Phone: 228-206-0408
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