My husband was paid under the table and didn't report the income on last year's joint tax return. I want to file Chapter 7 bankruptcy jointly with my husband, but I'm not sure if this will affect my bankruptcy discharge. I told my attorney about it, but he'll go ahead and file without including that income in the petition. Should I just do as he says?
3 Answers from Attorneys
My opinion is "no." Bankruptcy law requires that you FULLY & TRUTHFULLY disclose all income from all sources on your petition. At your hearing you are placed under oath and if you testify otherwise (and are found out) you could be subject to severe penalties under the bankruptcy laws. I personally wouldn't put my clients in that position. Unless the income is extremely high it shouldn't affect your qualifying for filing Ch. 7, but since I don't have the numbers or household size, I can't tell. Your atty should go over that with you.
As to the discrepancy between your income and that shown on your tax returns, that's a different issue. Some trustees don't really care what you do on your tax returns... others will question "why" you didn't include the income and accept your explanation... others might even refer the return to the Dept of Justice or IRS for follow-up, which may force you to file an amended return to cure the defect. That part you might be able to "play it by ear" depending on what happens at your 341a hearing.
So, you need to discuss all of the above with your bk atty and check all options, calculating how your qualification for ch 7 is or isn't affected by the various options presented. Best rule to follow in bk: Be accurate, complete and truthful!
I agree with Mr. Lago. The most important thing in filing a bankruptcy petition is to be truthful.
I agree with Mr. Lago. Your lawyer is pretty shady!