Tax Refunds in Your Bankruptcy
Tax Refunds in Your Bankruptcy case.
Like many people, you may be wondering about tax refunds in your bankruptcy case. Since your tax refund is part of what is called the bankruptcy estate, you may have to surrender some of it to creditors. This will depend on the type of bankruptcy you file and the timing of your refund and bankruptcy. It is best to have spent your tax refund check prior to filing bankruptcy. If that is not possible, your bankruptcy attorney may be able to protect most of it for you.
Tax Refunds in your Bankruptcy – Chapter 13.
A Chapter 13 bankruptcy is a bankruptcy in which you repay your debt in monthly installments. Each month you issue a payment to your trustee, who then disburses the money to your creditors. In the case of tax refund checks, this money is considered disposable income and therefore is turned over to the trustee for payments. If you have the Earned Income Credit or the Child Tax Credit, those amounts can be exempt from the bankruptcy payments. You may also be able to keep additional portions of your tax refund above and beyond these credits. Each year you get a refund, talk to your bankruptcy attorney about how much you can keep.
Tax Refunds in your Bankruptcy – Chapter 7.
A Chapter 7 bankruptcy is a form of bankruptcy in which your debt may be paid by property or valuables being sold off and the rest of your debt being wiped clean. In this type of bankruptcy, your tax return may only be affected from the year before and the year of your filing for bankruptcy. If you file bankruptcy after receiving your tax refund and have not spent it, the trustee will consider that as cash and require you to surrender it to the bankruptcy case. The same will go for the tax return you receive during the year you are filing. Subsequent years will not be affected by your bankruptcy case. Don’t let this scare you – your attorney will give you advice on how to protect as much money as possible.
Ways to Keep Tax Refunds in Your Bankruptcy.
If you are concerned about losing your tax refund check in your bankruptcy case, there are a few things that can be done. Your attorney can exempt some of your tax refunds. Bankruptcy exemptions may protect a portion of your tax refund. You can also change the amount of taxes that are withheld throughout the year in order to make your tax return smaller. If the trustee deems the return as too little, he or she typically will not require you to turn it over. If you are filing a Chapter 7 bankruptcy, you should spend your return prior to filing as well as file early in the year to avoid receiving another return during the case. Be careful of what you do with your refund. If you received a large refund before filing your case and spent it, you may have to prove where it went. This could be a problem if you paid friends or family with it. Discuss this with your bankruptcy attorney.
Please contact me today to discuss bankruptcy further. 314-827-4027.
 Sean C. Paul, Attorney, discusses tax refunds in your bankruptcy |
Sean C. Paul is licensed to practice law in the State of Missouri. His practice is located in south St. Louis County. He can help you with your Chapter 7 or Chapter 13 Bankruptcy case. Since divorce debt and bankruptcy is a complicated area, you should take to Attorney Sean C. Paul.Sean C. Paul will give you the individual attention you deserve. He will meet with you one-on-one to determine how he can help you. If you are considering filing bankruptcy in Missouri, please call today. |