Timing is Important When it Comes to Filing Bankruptcy

Posted by on July 22, 2016 under Bankruptcy Blog | Be the First to Comment

 

 

Many of the laws about bankruptcy are time-sensitive. When your case is filed can have significant consequences. This blog will address how timing of a bankruptcy filing can effect what debts can be discharged.

Income Taxes Can Be Discharged, with the Right Timing

Federal and state income taxes are forever discharged if you meet a number of conditions. Two of the most important of these conditions are met by just waiting long enough before filing your bankruptcy case:

• Three years must have passed since the time that the tax return for that tax was due (plus any extension if you asked for one).
• Two years must have passed since you actually filed the pertinent tax return.

For example, assume a taxpayer owes $10,000 to the IRS for the 2009 tax year. She had asked for an extension to file that year to October 15, 2010, but then did not actually file that tax return until October 31, 2011. The above 3-year condition is met after October 15, 2013, because that is three years after the tax return was due. But the 2-year condition has to be met as well, which would not occur until after October 31, 2013, two years after the actual tax return filing date. So filing a bankruptcy case on or before October 31, 2013 would leave that $10,000 tax debt still owing; filing on November 1, 2013 or after would result in it being discharged forever. Simply waiting this one day makes a difference of $10,000.

Now, there are other conditions involved in getting taxes discharged.  So, it would be wise to seek professional help.