Many individuals who have considered filing for bankruptcy are concerned about their tax refund. Will I be able to keep the entire refund? Will the court want to take some of the refund? Can I use some of the refund on ongoing bills? These are common questions that can have a tremendous impact on our client’s upcoming decisions.
Will I be able to keep my refund?
As with most legal questions, the answer is that it depends. Our first step as your attorney is to determine where your refund is coming from and how much of a refund will you receive. The court provides rules, called exemptions, that allow individuals who are filing for bankruptcy to keep certain things. With respect to tax refunds, the court has exemptions for refunds that come from Earned Income Credit and Additional Child Tax Credit. If you receive a refund from one of these sources, you can keep the entire amount, no limit. If your refund comes from any other source, the court could possibly ask you to turn over a portion of the refund to the court.
If you have already received your tax refund, the court will allow you to use some of those funds prior to filing for bankruptcy. If you need to pay your rent, buy food for the house, pay your car loan, or any other bill that is ongoing, the court will allow you to use those funds prior to filing the bankruptcy. If you have questions about what specific things are allowed, please Contact our office to review options.
There are many things that can possibly impact your ability to protect some or all of your tax refund. The size of your household, total value of your assets, the date you receive your refund, filing a Chapter 7 or Chapter 13 Bankruptcy, and many other issues. We offer free consultations to review these topics and will be happy to go over your specific questions. Contact us today!