I provide bankruptcy services in Indiana, so all this week in my blog posts, I'm going to 
answer questions that were asked by Indiana bankruptcy blog readers. I get questions about payday loan debt help, and student loan debt help, but this week, quite a few questions were about tax refunds.
During my twenty-plus years as a bankruptcy lawyer in Indianapolis, I've attended literally thousands of creditors' meetings along with my clients. The bankruptcy trustee goes over all the income and assets listed on the forms I've helped the clients prepare. The trustee will usually ask debtors if they're expecting any money to come in, perhaps from an inheritance, a tax refund, or a settlement from an accident. The trustee wants to be sure what resources can be used towards satisfying the debts. Even though these creditors' meetings are quite low-key (not anything like we see in TV courtroom dramas), the meetings are part of court procedure, and the debtor is under oath while answering the questions.
My reader would probably end up losing his tax refund. That money would become part of the "bankruptcy estate" and be used to repay creditors.
Speaking of tax refunds, one question the bankruptcy lawyers in Columbus (who work in my law offices there) tell me they hear a lot is, "Is it a good idea for a person to pay their taxes before filing bankruptcy?" This is a loaded question, in a way, and it has only one answer: "It depends!" What I'm trying to say is that, if taxes are a big part of your debt load, get legal advice fast! There are all kinds of little, yet extremely important legal details to consider.
Depending on what kind of tax you owe, and how long ago the tax liability occurred, paying taxes before filing bankruptcy could affect a number of things:
answer questions that were asked by Indiana bankruptcy blog readers. I get questions about payday loan debt help, and student loan debt help, but this week, quite a few questions were about tax refunds.During my twenty-plus years as a bankruptcy lawyer in Indianapolis, I've attended literally thousands of creditors' meetings along with my clients. The bankruptcy trustee goes over all the income and assets listed on the forms I've helped the clients prepare. The trustee will usually ask debtors if they're expecting any money to come in, perhaps from an inheritance, a tax refund, or a settlement from an accident. The trustee wants to be sure what resources can be used towards satisfying the debts. Even though these creditors' meetings are quite low-key (not anything like we see in TV courtroom dramas), the meetings are part of court procedure, and the debtor is under oath while answering the questions.
My reader would probably end up losing his tax refund. That money would become part of the "bankruptcy estate" and be used to repay creditors.
Speaking of tax refunds, one question the bankruptcy lawyers in Columbus (who work in my law offices there) tell me they hear a lot is, "Is it a good idea for a person to pay their taxes before filing bankruptcy?" This is a loaded question, in a way, and it has only one answer: "It depends!" What I'm trying to say is that, if taxes are a big part of your debt load, get legal advice fast! There are all kinds of little, yet extremely important legal details to consider.
Depending on what kind of tax you owe, and how long ago the tax liability occurred, paying taxes before filing bankruptcy could affect a number of things:
- Your ability to qualify for a Chapter 13 bankruptcy
- Whether some of your tax debt can be discharged through the bankruptcy process
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