Tax day
As the personal income tax return filing deadline is today, there are important tax-related bankruptcy issues to be addressed. Clients should get back from their attorneys any earnings statements they may have provided their attorney with as they will be needed in order to complete their return. Normally, back taxes and other debts owed to the government are not dischargeable in bankruptcy but rather are priority unsecured debts subject to withholding by federal and state authorities of any monies owing to the taxpayer. The government will get its money, even if it means retaining your refund until the debt has been paid off or at least a repayment plan has been arranged.
Under current bankruptcy law, debtors filing for bankruptcy must provide to the trustee presiding over their case income verification in the form of their last year’s completed tax return as well as their pay stubs for sixty days prior to the filing date. Trustees do not hesitate to seek the amount of any tax refunds as non-exempt assets subject to seizure in a Chapter 7 case. You will definitely be asked at the creditors’ meeting about the amounts of any tax refunds you expect to receive.
