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Behm Law Group, Bankruptcy Attorneys

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Bankruptcy During Tax Season

April 10th, 2015 · No Comments

While bankruptcies occur year round, timing is everything. Once you have determined you need to file for bankruptcy, consult with local attorneys, especially those whose practice focuses exclusively on bankruptcy. Factors such as assets, upcoming life changes (like marital status), and pending judgments you might have affect when you should file.

As you can see in the table below, people tend to file for bankruptcy predominantly around tax season. These statistics represent the 2014 bankruptcy filings according to the U. S. Courts:

Month in 2014 U.S. Total Filings Business Filings Non-Business Filings
January

70,491

2,233

68,258

February

74,508

2,228

72,208

March

70,491

2,233

68,258

April

90,670

2,563

88,107

May

87,966

2,467

85,499

June

76,223

2,253

73,970

July

79,239

2,218

77,021

August

77,190

2,098

75,092

September

75,312

2,039

73,273

October

81,179

2,295

78,884

November

64,250

1,830

62,420

December

65,161

2,094

63,067

Total

936,795

26,983

909,812

The highest number of total bankruptcy filings in the U. S. for 2014 was in April. In fact, according to Bob Lawless, bankruptcy filings consistently top out in the beginning part of the calendar year. Typically, January and February tend to accumulate at least 15% of the total filings, as is the case here.

Although the reasons could be numerous, let’s take a look at a few possibilities for why the beginning of the year and, in particular, the tax season may garner so much attention:

  • With taxes due April 15, people focus more on their finances and are apt to make significant changes then.
  • People think bankruptcy will lessen their tax burden.
  • Folks feel they can’t be audited if they file for bankruptcy.
  • Some think they can go on a spending spree before April 15, file for bankruptcy, and then owe nothing.
  • They expect a large tax refund and believe they can simply use that to pay toward a bankruptcy.

Wouldn’t it be nice if bankruptcy were that simple? It’s not. That’s why you should contact the bankruptcy attorneys at Behm Law Group, Ltd. Here’s why:

  1. In a bankruptcy, certain debt called priority debt cannot be discharged. Priority debt includes child support, DWI charges, some penalties, plus more.
  2. A bankruptcy does not stop an audit. The IRS gets priority here.
  3. If you go on a spending spree before declaring bankruptcy, that could be construed as intentional fraud.
  4. If you have filed for bankruptcy, you may or may not be able to spend your tax refund.

These are just a few examples where legalities can get tricky. You need to understand there are enough nuances within bankruptcy law that could really cause you problems if you don’t know what you are doing.

When to file tax returns regarding bankruptcy has its own issues. One thing that is certain is you cannot discharge taxes that haven’t been filed in the first place. For specific advice, contact the bankruptcy attorneys at Behm Law Group, Ltd.¬†We serve mankato, MN and the surrounding areas, including Marshall, Worthington, Owatonna, New Ulm, St. Peter, Redwood Falls, Waseca, and Fairmont.

One good thing to keep in mind is that discharged debt doesn’t really affect taxes because it isn’t considered to be taxable income.

This April 15, if you are considering filing for bankruptcy, make sure you have the facts. It may not be in your best interest to file now. Any important financial change deserves careful thought. For further advice, contact your local bankruptcy attorney.

Tags: Bankruptcy Advice · Bankruptcy Attorneys · Bankruptcy Information ·


 

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