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Marital Adjustment and Bankruptcy

Marital Adjustment and Bankruptcy
"With tax season in full bloom, you may be thinking about back taxes. Chapter 7 bankruptcy allows you to eradicate all income taxes with the exception of the following tax obligations:

a. The taxes are for a tax return that was due within three years (plus extensions) of your bankruptcy filing date.

On your 2007 tax return, you were shocked to discover that you still owed Uncle Sam money despite taking every deduction imaginable and using creative accounting. The deadline for filing your 2007 tax return was April 15, 2007. Therefore, declaring bankruptcy on or before April 15, 2010 (plus extensions) cannot discharge these income taxes. If you are granted an extension, you must account for it. If you file your taxes too early, you will forfeit the ability to receive a tax refund.

b. The IRS assessed the taxes within 240 days prior to your bankruptcy filing. If you are uncertain of the date of the assessment, you can request a record of it from the IRS.

For example, Uncle Sam audited you on December 15, 2011 and you now owe an additional $2,000.00 from your 2006 income. This income would be reported on your tax return for 2007. The $2,000.00 would not be released until August 11, 2012, or 240 days later.

c. Taxes that have not yet been assessed against you, but which the IRS reserves the right to assess.

d. The taxes pertain to a tax return that was lodged late AND within two years of the bankruptcy filing.

e. The tax debtor has committed fraud in connection with a tax return or has otherwise knowingly attempted to evade taxation.

If none of the exceptions listed above apply to your income taxes, they may be discharged in a Chapter 7 bankruptcy. Consult an experienced bankruptcy attorney for advice and an analysis of your unique situation.

It is fairly common for a married person to declare bankruptcy without their spouse. This occurs frequently for reasons such as:

This person alone has debt or, more importantly, unmanageable debt

2. The other spouse cannot register for bankruptcy due to a prior filing.

3. One spouse is morally opposed to filing or desires to maintain good credit

Even if only one spouse files for bankruptcy, the entire household's income is considered for bankruptcy calculations. This means that the non-filing spouse's income is included in the household income of the filing spouse. Obviously, the spouse who files taxes is permitted to include the spouse and any dependents as members of his or her household.

This is the reason why the Marital Adjustment is so crucial. The Marital Adjustment allows you to deduct expenses incurred by your non-filing spouse from your Current Monthly Income. You and your dependents, such as your children, cannot benefit from these costs. The most apparent examples include separate debts like a car payment, child support, or alimony paid by the non-filing spouse. Don't overlook the non-filing spouse's payroll deductions, including 401k, 403b, plan loans, and IRA contributions. The non-filing spouse may also be able to exclude expenses for hobbies, gym memberships, and recreation. Always seek the counsel of a competent bankruptcy attorney before proceeding.

In conclusion, Marital Adjustment can be the deciding factor between filing a Chapter 7 or Chapter 13 bankruptcy, so examine your situation carefully and inform your bankruptcy attorney. Additionally, Marital Adjustment can reduce the disposable income available to finance a Chapter 13 plan.""

" - https://www.affordablecebu.com/
 

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"Marital Adjustment and Bankruptcy" was written by Mary under the Finance / Wealth category. It has been read 113 times and generated 0 comments. The article was created on and updated on 01 June 2023.
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