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Bankruptcy and Tax Related Questions

When an individual files for bankruptcy, there are a lot of things that he/she needs to legally attend to. He/she may have to make decisions about the various financial debts and responsibilities that he/she may have. Taxes are one such aspect of an individual’s finances that need to be considered when filing for bankruptcy. Not knowing what to do with one’s taxes when filing for bankruptcy can lead to frustration and leave the individual feeling helpless with many questions unanswered. Given below are some questions about bankruptcy and taxes that individuals have asked that have been answered by Experts.

Can Sales Tax be discharged in a Chapter 7 Bankruptcy?

In most situations, sales tax may not be dischargeable in a chapter 7 bankruptcy. However, in some states of US, if the sales tax is an excise tax that was imposed on the merchant to give him/her the right to do business, then the individual may hire a tax attorney to try and get the sales tax discharged.

Can an Individual get his/her Taxes Discharged in a Chapter 7 Bankruptcy if he/she has not filed them?

An individual may not be able to discharge any kind of tax issues in a chapter 7 bankruptcy, if he/she has not already filed the taxes. In order to qualify for a discharge in a bankruptcy, the individual may need to have filed the taxes and they need to be at least three years old.

Can an Individual be Forced to Vacate a Property if the Property and the Property Taxes are a Part of the Bankruptcy Stay?

The probate court may not be able to force an individual to leave a property if the property and the property taxes are a part of the bankruptcy stay. However, the personal representative of the bankruptcy estate may request the bankruptcy court to grant relief from the stay. If this happens, the individual may be forced to vacate the property.

What can happen if an Individual does not give the Bankruptcy Trustee a part of his/her Tax Return once the Bankruptcy is Discharged?

If an individual does not pay the bankruptcy trustee a part of his/her tax return after the bankruptcy discharge, the trustee may request the court to set aside the discharge on the basis of nonpayment. If the individual is unable to pay the trustee, he/she may speak to the trustee and request for a payment plan. The trustee would not be obliged to give the individual a payment plan, but may do so if he/she wants to.

Is Federal Payroll Tax Dischargeable in a Chapter 7 Bankruptcy?

Federal payroll tax may not be dischargeable in a chapter 7 bankruptcy. An individual may only be able to discharge his/her income tax in a chapter 7 bankruptcy.

Can an Individual List his/her Daughter as a Dependent in the Bankruptcy if he/she is listed as a Dependent on the Individual’s Taxes?

Whether an individual lists his/her daughter as a dependent on his/her taxes would not be related to whether he/she lists him/her as a dependent in the bankruptcy. It may influence the bankruptcy court’s decision to accept the daughter as a dependent in the bankruptcy in some situations. However, in most cases, a person may be listed as a dependent in a bankruptcy case even if he/she is not listed as a dependent on the individual’s taxes and vice versa.

Understanding how bankruptcy can affect your taxes can help you plan your bankruptcy better. It will help you understand what you need to tell your bankruptcy trustee and what you need not inform the trustee. If you are not clear about the laws or have a question about bankruptcy and taxes, you should ask an Expert.
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Recent Taxes Questions

  • Some background info. Phil and Alice married file joint

    Some background info.
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    Phil files bankruptcy in 2009.
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