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How Chapter 12 bankruptcy affects taxes

Before filing for any bankruptcy chapter, it is important that you understand the implications that the particular chapter will have on your finances. Each bankruptcy chapter has its own set of eligibility guidelines, benefits and requirements. Therefore, you should not commit yourself before you are certain that filing for bankruptcy is right for you.

Chapter 12 bankruptcy is a chapter that was especially created for farmers and fishers. It takes into account that these workers are heavily dependent on seasonal income streams; therefore, it acknowledges that income will probably not be the same for each month of the year.

How can I qualify for Chapter 12 bankruptcy?

In order to qualify for Chapter 12 bankruptcy, you must be able to show that a minimum of half of your income in the last three years has come from either fishing or farming. If you are filing as a couple, the same is true and it accounts for your combined income.

How will Chapter 12 bankruptcy affect my taxes?

If you have tax debts when filing for Chapter 12 bankruptcy, these will be prioritized in your repayment plan. Therefore, you will pay off these tax debts before anything else.

In addition, as part of the repayment plan in Chapter 12 bankruptcy, you will have to use all of your disposable income to repay your debts. If your tax debts have not been paid off after you have used all of your disposable income, they will be written off.

If you are considering filing for Chapter 12 bankruptcy, it is a good idea to learn more about how it can benefit you.

Source: Tex Debt Help, “Chapter 12 Bankruptcy and Taxes: Requirements & Details,” accessed June 08, 2018