How will your tax refund be treated in bankruptcy?
By David Leibowitz, Illinois and Wisconsin Bankruptcy Attorney on Jan 8, 2009 in Chapter 7 Bankruptcy, Exemption Issues, Illinois, Tax Issues, Wisconsin
Do you get to keep your tax refund when you file for bankruptcy?
Many people who are thinking about bankruptcy at this time of year forget that their income tax refunds are a valuable asset. If you file your bankruptcy case before you get your income tax refund, you may lose it.
If your income tax refund is not protected by the bankruptcy laws as they apply in your state, you may lose your refund.
Don’t let this happen to you. If you are thinking about filing for bankruptcy, tell your lawyer if you have filed your income tax return and whether you are expecting a refund. You will get valuable advice.
Your lawyer can tell you if you will be able to keep some or all of it. For example, in many states, including Illinois and Wisconsin, earned income tax credit or child care credits may be protected by exemptions as a welfare benefit.
If your refund is not protected, proper planning may help you save part or all of it.
And remember, April 15 is just around the corner!
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