What are the tax consequences of Chapter 13 Bankruptcy?

In Alabama, Chapter 13 bankruptcy will have tax consequences. Generally, when an individual files for bankruptcy, any taxes incurred during the year will be fully discharged. This means the filer will not be required to make any payment on the past due taxes. However, depending on the type of bankruptcy, future tax consequences can arise. In Chapter 13 bankruptcy, the filer proposes a payment plan wherein creditors are repaid over a period of three years. Generally, filers must repay all of their creditors in full. Though past taxes may be discharged, any taxes like payroll taxes that were incurred after the filing of the bankruptcy must still be paid in full. This means the filer will still be liable for any taxes incurred during the life of the bankruptcy plan. The filer must also pay any taxes due on any assets they wish to keep, such as a home or vehicle. All taxes are subject to the repayment plan. If the taxes are not accounted for in the plan, the filer may still be liable for them. In addition, the filer must pay any income taxes due during the life of the plan. Any refund that may have been earned prior to filing for bankruptcy is not subject to discharge. Therefore, any refund earned while in the plan must be paid in full. In summary, the tax consequences of Chapter 13 bankruptcy in Alabama include the filer still being liable for any taxes incurred during the life of the plan as well as all refunds that have been earned while in the bankruptcy. It is important for filers to consider these tax liabilities when creating their bankruptcy plan.

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What are the tax consequences of Chapter 13 Bankruptcy?

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