Many debtors may not realize how significant tax documents are when it comes to filing bankruptcy. These documents are often presented to your trustee when you begin the filing process along with your list of creditors and outstanding debt. It's common for some to not have their tax returns filed but if you're seeking to file bankruptcy, especially Chapter 7 bankruptcy , your tax returns should be up to date.
A copy of your tax return is required by the bankruptcy court for a number of reasons. Your tax return tells how much you earn over the previous year and helps determine your financial state compared to where you are currently. In some cases, creditors may be entitled to a copy of your return when they respond to your bankruptcy petition filing. Depending on your situation, you may need to visit your local tax office to get your taxes completed and caught up if you haven't filed them in recent years.
If you are considering bankruptcy and have yet to file your tax return, it is likely you should complete your tax returns before filing bankruptcy. It's often recommended to file taxes prior to filing your bankruptcy petition if you are expecting a refund. Refunds are often considered part of your bankruptcy estate. If your refund will be used toward living expenses, then chances are you'll be able to use if for that purpose. Just keep in mind, if you use your refund for non-essential purchases, this could make your case more complicated or even get dismissed.