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How does a Chapter 7 bankruptcy filing affect one’s taxes?

Many of those in Louisville facing financial difficulties and debts that they simply cannot cope with choose to file for Chapter 7 bankruptcy. Also known as a ” liquidation bankruptcy,” Chapter 7 bankruptcy may be an option for those who are unable to address their debts by making regular payments each month. In a Chapter 7 bankruptcy, a Chapter 7 trustee converts a person’s property into money, which is then distributed to creditors.

For Chapter 7 to be an option, in many cases, it does not matter how far a person is in debt or whether the person is solvent. This makes it an attractive choice for many. However, to obtain financial relief under Chapter 7, it is imperative that a person not incur more debt.

Moreover, when it come to taxes, according to the Internal Revenue Service, a person may need to up the amount of whit holdings that are taken from their paychecks or pay more towards their estimated taxes. This is because a person, who is going through the Chapter 7 bankruptcy process, may still receive their annual tax refund. But, such refunds may be delayed, or even completely taken, in the bankruptcy process. Nonetheless, some taxes are discharged through Chapter 7 bankruptcy, but this depends on the specific circumstances of each person’s case.

In the end, those who are wondering how their finances and taxes will be affected by their Chapter 7 bankruptcy filing may want to consult with an attorney. Whether they are wondering whether their tax debts are dischargeable under the bankruptcy process, what tax changes they may need to make after filing for personal bankruptcy or just how bankruptcy can help them achieve financial freedom, an attorney can answer these questions.

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