Although this is a Chapter 7 case, it is relevant in Chapter 13 cases. Judge Flatley’s decision deals with the timely production of tax returns to the trustee.
The appropriate section of the Code, which went into effect in October 2005, requires the debtor to provide:
Not later than 7 days before the date set for the first meeting of creditors, 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.
11 U.S.C. §521(e)(2)(A)(i). (Emphasis added.)
The penalty for failing to provide the most recent tax return 7 days in advance of the 341 meeting is dismissal. The Code mandates dismissal “unless the debtor demonstrates that the failure to so comply is due to circumstances beyond the control of the debtor.”
11 U.S.C. §521(e)(2)(B).
The Orellana Court held that the timely delivery of the most recent tax return filed satisfied the requirements of the Code. The debtors in Orellana had last filed federal tax returns in 2007, and that return was provided to the trustee, although the Court noted that it was unclear from the record whether the tax return had been delivered timely. A second hearing was to have been held, but the docket shows that the Chapter 7 trustee withdrew his motion to dismiss.
Providing the tax returns in a timely manner is a duty of the debtor. Nearly 15 years since the enactment of BAPCPA, some attorneys fail to timely provide the tax returns—frequently bringing them to the meeting of creditors and thinking that is good enough. It is not, as some have found out.
In those cases in which I do not have tax returns when I prepare for the meeting of creditors, I ask the debtor at the hearing if he/she is required to file tax returns. If yes, and I don’t have the tax returns, I stop the meeting of creditors at that point and continue it to the next docket. I allow any creditors present to ask questions so they need not put in another appearance. Providing the tax returns at or after the meeting of the creditors does NOT take the continued meeting off the next docket. I did not complete my questioning of the debtor so both debtor and counsel are required to attend.