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Will filing bankruptcy change the way I file taxes?
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I may have to file for bankruptcy soon because of compounding financial problems. Filing out my tax forms has always been a major source of frustration for me. I don’t want to add any more complications to the process, because I cannot afford to pay for assistance on my tax filing. Will filing for bankruptcy have any effect on the tax filing process?
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The bankruptcy process will bring varying, major changes to the financial status of the filing individual. Credit score is affected for up to ten years following the bankruptcy, any lost possessions to Chapter 7 bankruptcy are permanent, and any payment plan created through Chapter 13 bankruptcy can only be amended through further bankruptcy court hearings.
However, filing for bankruptcy makes no overt changes to the process of filing taxes before, during or after the filing. Minor changes occur only with the information recorded in the tax filing. In some cases, debts may be pardoned from a debtor. When this happens, this debt relief must be included in tax filings as an income.
In certain debt cancellation situations regarding an individual’s principal place of residence, this value may be excluded from income, but still must be included as part of the tax return filing. Debt cancellation is limited to $2 million dollars.
Posted by Greg Cohoat on 18 May 2010
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