4 Reasons to File Your Tax Returns Before Bankruptcy
Filing for bankruptcy is a big financial decision that requires strategic planning and careful timing. Choosing the right time to file for bankruptcy impacts the outcome of the proceedings and one’s financial future. Notably, the timing of tax filings can impact the bankruptcy process. Filing taxes before bankruptcy allows individuals to assess their tax situation and address any tax-related issues before initiating the bankruptcy process. This article explains four essential reasons to file your tax returns before bankruptcy.
Accuracy of Financial Information
Accurately reporting income, expenses, and other financial details is a requirement when filing taxes. This information is crucial for the bankruptcy process, as it helps determine the individual’s financial situation and eligibility for certain types of bankruptcy. For this reason, completing your tax filings before initiating the bankruptcy process provides you and your bankruptcy attorney with a more precise and comprehensive understanding of your financial situation.
Bankruptcy Law Compliance
During bankruptcy proceedings, the court may request proof of tax filings and adherence to tax laws. Neglecting to file taxes can add complexity to the bankruptcy process. For example, if you file for Chapter 7 bankruptcy and have unfiled tax returns, those tax debts will not be discharged.
Up-To-Date Bankruptcy Schedules
The bankruptcy schedules consist of forms that every debtor must complete and submit to the bankruptcy court within a specific timeframe after filing the bankruptcy petition. These schedules paint an overview of a debtor’s financial portfolio at the time of the bankruptcy case filing. They require information from recent tax returns, and filing taxes before bankruptcy ensures that this information is up-to-date.
Financial Transparency
Filing taxes demonstrates a commitment to financial transparency and a willingness to comply with financial obligations. The bankruptcy court values both of these attributes. This readiness to meet financial responsibilities can positively influence bankruptcy proceedings.
Timing matters when filing for bankruptcy. By understanding when to initiate the process, you can navigate the complexities of bankruptcy law more effectively to maximize the benefits available. Don’t let financial stress weigh you down. Let us guide you through the steps to lay the groundwork for a more stable financial future. Contact us today to schedule your free consultation.
