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Important tax tips for bankruptcy filers

On Behalf of | Oct 8, 2018 | Chapter 7 Bankruptcy |

As someone who is currently navigating your way through a Tennessee bankruptcy case, you are probably trying to find out as much as possible about how your filing will affect your life, and how it will help you regain control of your finances. It is also important, however, that you determine how filing for bankruptcy will impact your taxes. At McElroy & Associates, we recognize that filing for bankruptcy will affect how you file your taxes, and we have helped many clients facing this and related issues find solutions that meet their needs.

Per TurboTax, one of the first things you should do after filing for bankruptcy is avoid taking on any new debt. Why? The rules associated with filing for bankruptcy dictate that you may not accrue any new delinquent balances while your finances are under the bankruptcy court’s supervision. If you do, this can lead to a dismissal of your entire bankruptcy case.

You may, too, want to file your taxes before filing for bankruptcy, if possible. In the event that the tax deadline has already passed you by, make sure you have all your tax records easily accessible at a moment’s notice. Additionally, be prepared to share exactly how you spent any money you received on your tax return, because you can typically count on trustees requesting a detailed breakdown of your spending.

Finally, make sure you do not miss the tax-filing deadline. You can face multiple penalties and fines for doing so, among them a fee for failing to file on time and another, separate fee for failing to pay taxes at all. You can find more about bankruptcy by exploring our webpage.