01 Mar Don’t Lose Your Tax Refund In Bankruptcy
Bankruptcy and tax refunds are on the minds of all good bankruptcy lawyers.
As tax time approaches, and it bears repeating that tax refunds can be taken in bankruptcy if you aren’t careful.
Many people mistakenly think that if they haven’t filed the tax return before filing, it isn’t something that needs to be put into the bankruptcy petition.Both Chapter 7 or Chapter 13 bankruptcy filers need to know what their refund will be before filing, schedule it as an asset in the petition, and exempt it. If there isn’t enough exemption to cover the refund, the trustee will take it and use it to pay towards your debts.
Bankruptcy trustees know to ask if people are due a refund, and they will check the tax return to see if there is any money due. Tax refunds need to be listed and exempted just like any other cash or bank account since it is your money being held by the government until you claim it.
There are ways to protect your funds, but you need to be careful that you understand how the law works, and what you can do with the refund to protect it.
If you don’t know what your refund will be, you can still list an unknown amount and claim a set amount under any available exemption you have. Your bankruptcy attorney can help you apply the exemption laws to your best advantage.
If you file with an unknown refund due, be aware that once you file your case you are stuck with your assets and exemptions and if you end up with more refund than expected, you may find yourself turning over your money to your trustee.
Tax Refunds As AssetsbyRachel Lynn Foley, Kansas City Bankruptcy Lawyer,
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