Thinking About Filing Chapter 13 Bankruptcy in San Jose? Be Sure to File Your 2011 Taxes Right Now!

File Taxes Before Filing Chapter 13 Bankruptcy in San Jose, CAThe deadline to file your 2011 taxes (this year we have until April 17) is just about three weeks away. It happens every year around now. San Jose Chapter 13 Bankruptcy clients need to file their bankruptcy urgently to stave off a pending foreclosure, stop a lawsuit, bank levy or wage garnishment. But they haven’t yet filed their taxes for this year. April 17 is just around the corner. Outside of bankruptcy, the taxpayer might well file for an extension for this year’s tax returns.

However, Bankruptcy Code Section 1308 (11 U.S.C. §1308) requires that a debtor in Chapter 13 Bankruptcy must have filed his or her taxes for all taxable periods during the four year period leading up to the filing of the Chapter 13 bankruptcy case. The deadline is the day before the Chapter 13 bankruptcy debtor’s first Meeting of Creditors. The San Jose Chapter 13 trustee may file a motion to dismiss a Chapter 13 bankruptcy case if the debtor has not filed his or her taxes by the Meeting of Creditors. While we may be able to obtain a brief extension on this requirement, no Chapter 13 bankruptcy client should count on it!

The San Jose Chapter 13 bankruptcy trustee will not accept a filing requesting an extension; nor will the Oakland Chapter 13 bankruptcy trustee, and I am certain that no other Chapter 13 trustee in the Northern District of California will accept an extension in lieu of a filed tax return in a Chapter 13 bankruptcy.

While this is an absolute requirement in Chapter 13 bankruptcy cases, we also encourage all San Jose Chapter 7 bankruptcy clients to be current in filing their tax returns prior to filing bankruptcy in San Jose. It is true that some Chapter 7 bankruptcy clients will have such low income as to not require filing a tax return at all. In such cases, although we may be able to comply with the requirements of Bankruptcy Code Section 521 (which requires that among other documents, the debtor’s most recent tax return be provided to the Bankruptcy Trustee), with a sworn declaration by the Chapter 7 debtor stating the reason why the debtor was not required to file a tax return, it is still preferable that every bankruptcy debtor file his or her most recent tax returns. This is because the Statement of Financial Affairs (“SOFA”) attached to the bankruptcy petition requires that the debtor state his or her gross income from employment or operation of a business for the two years preceding the filing of his or her bankruptcy petition.  Without having filed tax returns for these years, it may be very difficult for Chapter 7 bankruptcy petitioners to state such income with any precision.

Our San Jose bankruptcy lawyers are here to help debtors filing Chapter 13 bankruptcy or Chapter 7 in San Jose. We only represent debtors, and we are always sympathetic to the needs of our clients and never judgmental. We want your Chapter 13 or 7 bankruptcy to succeed. To ensure the success of your case, we urge you to file your tax returns now, whether or not you seek our bankruptcy advice.

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