Taxes And Bankruptcy: Some Things To Know, Some Things To Ask About.
As you go through bankruptcy in Michigan or elsewhere, tax matters of various types may require your attention and awareness. At Gudeman & Associates, P.C., our attorneys are highly knowledgeable about both bankruptcy and taxation issues. We will be able to advise you in all aspects of your financial big picture that have to do with your bankruptcy and tax liabilities or benefits.
Some Questions And Answers
Get myths busted and bring your questions to our attention. Meanwhile, look over the following sample questions and answers.
Does the government of Michigan need to know that I am filing bankruptcy?
Yes, The Michigan Department of Treasury asks taxpayers who are filing bankruptcy to notify the department. Throughout a bankruptcy, a taxpayer and their lawyer(s) should use the bankruptcy unit within the Collection Services Bureau of the Michigan Department of Treasury as their point of contact with the state.
What if I have a tax refund due to me?
With a Chapter 7 bankruptcy, any pending tax refund will be sent to you after the completion of your bankruptcy. In a Chapter 13 bankruptcy, your refunds will come to you directly as they normally do.
What if I owe taxes?
Most taxes are not dischargeable in bankruptcy. You may need to pay back taxes after your Chapter 7 bankruptcy is complete or you may repay back taxes as part of your Chapter 13 debt reorganization. Certain types of taxes may be discharged as part of your bankruptcy if you meet certain criteria. It is important to work closely with an attorney to determine what steps you should take. Timing may be critical.
Can I set up an installment agreement or initiate an Offer in Compromise (OIC) during my bankruptcy to account for unpaid back taxes?
The Michigan Department of Treasury’s answer to both questions is no. However, if you file a Chapter 13 bankruptcy, your back taxes will likely be built into your three-to-five-year debt reorganization and repayment plan.
Will I need to pay taxes on the value of debts that are wiped out through my bankruptcy discharge?
No, and this is a great advantage of bankruptcy. In contrast, if your debts are forgiven through settlement negotiations, the value of those forgiven debts may be considered taxable income.
What If I Have More Questions?
Contact Gudeman & Associates, P.C., by phone at 248-630-3671 or send an email request for a free consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.