Collision of Tax Return and Bankruptcy Forms

October 1, 2013

Bankruptcy attorneys use many tools to uncover the debtor’s finances. Actual bills from collectors, a tri-merge credit report, bank statements, pay stubs, deeds, and promissory notes are all commonly requested documents to assist the attorney in drafting the bankruptcy petition and schedules.

Many debtors (and some attorneys) overlook the wealth of information contained in the 1040 tax return. This information is especially useful for completing the Statement of Financial Affairs (SOFA), which is a declaration, under oath, of the debtor’s financial transactions. Since recent tax returns are sent to the bankruptcy Trustee’s office for review, it is prudent to review these documents to ensure that the information provided in the bankruptcy paperwork is truthful and consistent with the Form 1040.

Here are a few gold nuggets that may be discovered when examining the debtor’s 1040:

– Income: Does it match the income disclosed on Line 1 of the SOFA?
– Distributions from retirement accounts: Open retirement accounts must be listed on Schedule B. Closed accounts are listed in the SOFA.
– Gains or losses from sales of stock
– Investment real estate: Does the debtor make the appropriate disclosures regarding real property in his bankruptcy schedules?
– Charitable contributions: This can provide good evidence for means test purposes or SOFA disclosures.
– Business interests including partnerships and estates: Where there is a business, there are usually business assets.
– Form 1099 Cancellation of Debt: The SOFA asks about debt settlement or foreclosures.
– Dividend income
– Student loan interest

Taking the extra time to inspect the debtor’s 1040 can save time scrambling to explain to the bankruptcy Trustee why the information contained in the tax return does not match the information in the bankruptcy schedules. The tax return can also help uncover issues that may be confusing to the debtor when answering questions on the bankruptcy forms. If you are considering bankruptcy, the experienced bankruptcy attorneys at the Fears Nachawati Law Firm are here to assist you, and are eager to help you make a fresh start financially. To set up a free consultation, call our office at 1.866.705.7584.

More Blog Posts

CONTACT US

Use the form below to send us a note, call us at 214.890.0711 or chat with us live. We are eager to help with all your legal needs. Please keep in mind that any unsolicited information sent through our website cannot be treated as confidential. Contacting us through this site does not create a representation relationship with Fears | Nachawati.

Inquiry Type

  • General
  • Personal Injury
  • Immigration
  • Bankruptcy
  • Drug Litigation
  • Family Law

Locations

With offices in Texas, Florida and Colorado and attorneys licensed in Texas, Florida, Colorado, Arkansas and Oklahoma, Fears | Nachawati is dedicated to attaining the best possible solutions for our clients’ business and personal needs. We strive to be professionals who are creative, empathetic and reliable.

All Areas Served

We Can Help

Contact Fears Nachawati today

Free Consulation

Live Chat (Online Now)