Creditor Requests for Tax Returns in Bankruptcy
By Nicholas Ortiz, Boston Bankruptcy Attorney on Dec 1, 2008 in Tax Issues
The BAPCPA amendments to the Bankruptcy Code allow creditors to request a tax return directly from a debtor. Section 521(e)(2) provides that:
(A) The debtor shall provide-
(i) not later than 7 days before the date first set for the first meeting of creditors, to the trustee a copy of the Federal income tax return required under applicable law (or at the election of the debtor, a transcript of such return) for the most recent tax year ending immediately before the commencement of the case and for which a Federal income tax return was filed; and
(ii) at the same time the debtor complies with clause (i), a copy of such return (or if elected under clause (i), such transcript) to any creditor that timely requests such copy.
(B) If the debtor fails to comply with clause (i) or (ii) of subparagraph (A), the court shall dismiss the case unless the debtor demonstrates that the failure to so comply is due to circumstances beyond the control of the debtor.
A recent case, In re Fontaine, 2008 WL 4939887 (Bkrtcy.D.Mass.2008), clarified this provision. The Fontaine court held that if the request from a creditor comes after the debtor provides his tax return to the trustee, the request is untimely. However, the dismissal language of the provision is mandatory. So, if a debtor gets a creditor request for a return before the transmission of the return to the trustee, the debtor must make sure to send a copy to the creditor, or the case will be dismissed upon the creditor’s request. There are two lessons here: it is smart to provide the trustee with the required return ASAP after the case is filed, and it’s important to have a lawyer with in-depth knowledge of the BAPCPA requirements.
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