Tax Basics

• When a creditor forgives your debts and you did not file Chapter 7, that is considered taxable income, the Internal Revenue Service warns. But all debts forgiven as a result of your bankruptcy case are not taxable income. You do not have to disclose your Chapter 7 status on current or future state and federal tax returns.
  
  

Additional Tax Considerations

• You cannot discharge through Chapter 7 your obligations to repay recent state, federal and local income taxes. If you have tax bills that were incurred less than three years before you filed for bankruptcy, you must make arrangements with the taxation agency to repay those financial obligations. The three-year time frame begins with the date you actually filed the tax return and not the tax year itself, warns the book "How to File for Chapter 7 Bankruptcy."
  
  

Income Qualification

• Your recent tax returns and pay stubs are important in proving you even qualify to file Chapter 7. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires people filing Chapter 7 to either earn less than their state's annual median income level or prove their inability to partially repay creditors while supporting their families. As of 2011, the annual median income for a single Arkansas resident was $32,834, while the level for a single resident of Maryland was $55,774, according to the U.S. Trustee Program.
  
  

Ineligible Debts

• If you charged up credit cards right before filing Chapter 7 or lied to get credit, you cannot include the resulting debts in your case, according to "How to File for Chapter 7 Bankruptcy." Likewise, you cannot include future debts. You also cannot discharge your obligations to pay child support, alimony, court fines and lawsuits related to illegal activities such as fraud or drunken driving. In almost all cases, you cannot discharge federally issued student loans in bankruptcy. A judge may approve a rare exception if you are seriously and permanently disabled or if an unavoidable situation occurred, such as your college going out of business.