On behalf of Bigge & Rodriguez, PA posted in Chapter 13 on Wednesday April 15, 2015.
Well, it’s April 15 2015, and your tax returns are due by Midnight. Many people will get tax refunds; many will owe money to the Internal Revenue Service.
If you are contemplating a personal bankruptcy at this time, your 2014 tax return must be taken into consideration. If a Chapter 7 bankruptcy is an option, the tax refund may become property of a Chapter 7 Trustee. In Chapter 13, the Tax Refund may be retained.
In Chapter 7, the Refund is treated as an asset to be distributed for the benefit of creditors. In Chapter 13, the refund is treated as income and is retained by the filing party.
If you owe the IRS money, a Chapter 13 bankruptcy can be used to pay the IRS over a period of wither 36 or 60 months. The IRS will be forced to cease collection efforts and must consent to a payment plan. Penalties and interest on the liability will normally be frozen as of the date of the Bankruptcy filing.
In the event that there is a tax lien, penalties will still be frozen, however, the IRS will be entitled 3-4%. This interest rate is significantly lower than the interest the IRS would otherwise assess outside of bankruptcy.
In closing, a tax refund or tax liability is an important consideration when contemplating a Chapter 7 or Chapter 13 bankruptcy.
Seek expert advice from a Certified Public Accountant, and a Fort Lauderdale Bankruptcy Attorney. Contact Bigge & Rodriguez in Fort Lauderdale at 954-400-7322.