3 Things To Know About Tax Returns And Chapter 13 Bankruptcy
If you are planning on filing Chapter 13 bankruptcy, you will need to turn in a variety of different documents in order for your case to get approved. Among those documents is your tax returns, and this will not be the only time you must submit copies of them. Here are three things you should know about your tax returns if you are planning on filing Chapter 13 bankruptcy.
Filing Relies On It
The first thing to know is that you cannot file for Chapter 13 without your tax returns. Your attorney will ask you for your tax returns for the past two years, and you must have these to file. If you do not have them and try to file for Chapter 13, the trustee is likely to dismiss your case.
Your tax returns are used to determine how much income you make, and to see what kind of tax refunds you receive each spring. Without these documents, the lawyer and trustee cannot make the necessary calculations.
You Must Submit Copies Each Year
Chapter 13 bankruptcy typically lasts three to five years. During this time, the trustee will keep a close eye on your finances. You will be required to file monthly financial statements with the trustee for this purpose, but you will also have to turn in your tax returns each year during the repayment plan.
This means you have to file your taxes each year. If you do not, the trustee may dismiss your bankruptcy case, no matter what point you are at. The trustee needs these documents each year to verify your income, and that what you are saying is true. Your tax returns are also needed to allow the trustee to see if you are expecting a tax refund.
The Trustee Can Take Your Tax Refund
Whenever anything changes with your income, you will be required to notify the trustee while your bankruptcy case is active. If you receive a pay increase at work, you must report this. If you receive a windfall of cash, you must report it. If you are expecting a tax refund, the trustee must also know this.
Trustees often consider tax refund money disposable income. Because of the way Chapter 13 bankruptcy works, the trustee has a right to seize this money if he or she thinks that it is simply "extra" money for you. If this happens, your creditors will receive more money than they thought they would, but this would not affect the payments you will make in the future. In other words, it will not reduce the amount you owe your creditors; it is just an extra for them.
If you need help with the debt you have, filing Chapter 13 might be a good option to look into. You can learn more by making an appointment with a bankruptcy attorney.