For most of us, filing our taxes is a stressful process. But for those who filed bankruptcy in the past year, they may be confused about the affect it had on their taxes and how it changes the way they file their taxes. Which forms do you file and who files your taxes for you?
If you filed for Chapter 7 bankruptcy protection, your debt is discharged and your affairs become part of an “estate” with a trustee handling the payment to creditors. If you filed Chapter 7, you are still required to send an individual tax return to the IRS and the trustee will file a 1041 bankruptcy estate form.
If you filed for Chapter 11 bankruptcy, you as the debtor acts as the trustee of the estate and are responsible for the payments to creditors. In this situation, the tax payer would still file a 1040 tax return, and also a 1041 bankruptcy estate form.
In the case of a Chapter 13 bankruptcy, you as the debtor arrange for a payment plan with your creditors. You will submit a 1040 tax return and the trustee files a 1041 form.
In each case, prior to filing for bankruptcy protection, you were required to disclose any assets. If you are entitled to a tax refund, you are may be required to turn that refund over to the trustee to be applied towards your debts. In most cases, the court will petition to the IRS to send the refund directly to them.
One concern that may arise in all of these situations is whether or not the discharged debt is considered taxable income. If you have received a 1099-C from a debt that was discharged in bankruptcy, it’s best to discuss with the trustee or an attorney.
Although you may be facing financial difficulties, you are not alone. Over 2 million people filed for bankruptcy protection last year. If you have filed for bankruptcy or you believe that bankruptcy protection is your only solution to debt relief, call Adams & Associates for a free consultation at (888) 724-9860. Richard Adams has been a bankruptcy attorney in Miami for over 25 years and he and his associates are here to help you answer your questions and guide you through this difficult time.
Item from Richard Adams Bankruptcy Lawyer, Miami