In cases where my clients are expecting a tax refund, many wonder if they will have to declare this as an asset of the bankruptcy estate. In many cases it is. But there are methods of preserving your tax reimbursement if you are anticipating one.
1.) The money that the government owes you for a tax refund may be claimed as exempt property.
2.) You can apply your reimbursement toward next year’s taxes. However, should you make this decision it is irrevocable, you cannot change your mind.
3.) Filing jointly if you are married and only one of you files for bankruptcy, the other may still get their share of the tax return, because that spouse does not have to suffer the consequences of bankruptcy.
4.) You can always keep the refund from becoming property connected with the bankruptcy estate by waiting to file until after you receive your refund. After receiving your tax refund, you will likely be able to spend this money on your attorney’s fees or necessities. These are both legitimate purchases to devote your tax refund to.
5.) If you use your tax refund to pay someone back, like any kind of creditor, including family and friends that you may have borrowed money from, then the bankruptcy trustee will ask that you pay the amount received from the tax return. However, if you do not use the money to repay someone and spend it on something like getting your roof fixed or repairing your car, they will usually not go after you to get the tax return money.
If you have any questions on this topic or are in need of a financial fresh start, please contact our experienced team of bankruptcy and foreclosure defense attorneys at (305) 285-9100. The day you hire our firm, we will contact your creditors to stop the harassment now. You can also find useful consumer information on the Kingcade & Garcia, P.A. Web site at www.miamibankruptcy.info/.
– Timothy Kingcade