New bankruptcy law.

The Service has issued a fact sheet (FS-2005-18) reminding debtors of their new responsibilities under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (P.L. 109-8), which generally went into effect for bankruptcy petitions filed after Oct. 17, 2005. The new law requires debtors to comply with certain tax-filing responsibilities, as well as provide copies of previously filed returns to creditors in some circumstances.

Filing returns: Under the new law, the IRS may request the bankruptcy court to order a dismissal or a conversion of a bankruptcy petition if the debtor fails to file a tax return (or fails to file for an extension) that becomes due after the date the petition is filed. A dismissal or conversion may also be ordered if a Chapter 11 debtor fails to pay any Federal tax obligations owed after the date the bankruptcy petition is filed. Chapter 13 debtors must also file all Federal tax returns for the four-year period before the bankruptcy petition, to have their bankruptcy plan confirmed.

Copies of returns: Generally, the new law requires that debtors must provide a copy of their most recently filed Federal tax return (or a transcript) to any requesting creditor. In addition, the debtor must provide a copy of the return to the bankruptcy trustee at least seven days before the first meeting of creditors. If a debtor files an amended return or files any returns that are past due while the bankruptcy case is pending, copies must be filed with the bankruptcy court at the same time they are filed with the Service.

Means testing: One of the centerpieces of the new law is a "means test" designed to force Chapter 13 debtors to make regular payments on their debts based on certain income thresholds. To determine the means test, a bankruptcy court is authorized to use IRS-published expense standards; however, these standards are for tax purposes only and may differ from those established by a bankruptcy court.

Leslie S. Laffie, J.D., LL.M.