Filing Bankruptcy? States Delaying Payment Of Tax Refunds May Hurt You

15 Mar Filing Bankruptcy? States Delaying Payment Of Tax Refunds May Hurt You

ROBICSEK: Mimosa blossom

Many people considering bankruptcy can be affected by a state or the federal governmentdelaying sending out tax refunds. When you apply to get your refund can also make a difference on your bankruptcy case.

  • Timing of when you actually get the money can be the difference between whether or not you get to keep your refund when youreceiveit.

One of these states that has delayed sending out money quickly is my state of North Carolina. I saw two common but different situations come into my office when refunds weren’t mailed out quickly.

First there are people who were planning on using the tax refund to pay for their case and/or attorney fees. Their plans to file were delayed until receipt of funds.

Second there were those who depend on the tax refund to pay bills, catch up on rent or car payments, or just buy food or gas. The straw that breaks the camel’s back causing them to seek legal advise about their financial problems is that they just can’t wait any longer for the money to arrive.

For the first group, hopefully a delay in getting the money together to pay an attorneywon’t matter too much other than the aggravation of having to wait move on. Many people take a few months to come up with payment for bankruptcy and this often poses no problem.

  • Depending on the client’s situation, it sometimes makes little difference if a case is filed today, or a few months down the road.

For others, timing is everything. Each month that passes gives a new set of figures for calculation of the means test, and a debtor’s ability to qualify for Chapter 7 may change with the passing of a single month.

For the second group, they might be helped by this in an odd way. Many would have likely used the entire tax refund to squeeze out one more month’s payment on their debts – often unsecured debts like credit cards that they can discharge in the bankruptcy case. Because they don’t have the tax refund yet, they can’t waste it paying a debt that they can’t pay off.

Many people who seek my advise come in only after they have exhausted all funds and they have no money left to pay their mortgage or hire a lawyer. By delaying the refund, the client may seek legal advise earlier, while they are still owed money and can make a better decision on how to use it.

The decision to file for bankruptcy is a difficult one, and one that should not be entered into lightly. If you are having financial problems, the best thing to do is to consult an experienced lawyer to determine if filing is a good option for you.

see also: Don’t Lose Your Tax Refund In Bankruptcy andBankruptcy Means Test: Costly and Really Pointless by Susanne Robicsek, Charlotte NC bankruptcy lawyer

BAPCPA The New Bankruptcy Law: A Mean Law by Susanne Robicsek

Bankruptcy Reform: Costly But Pointless by Cathy Moran, Bay Area CA Bankruptcy Lawyer

Part Four: Kinds Of Income Reported In Bankruptcy; What Is CMI, Also Known As Means Test Income? by Susanne Robicsek

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Concentrating in Consumer Bankruptcy Law since 1988; Wake Forest Law School JD 1987 Law Office of Susanne M. Robicsek since 1993, Law Clerk to Judge Rufus Reynolds, US Bankruptcy Judge for Middle District of NC; Burns Price & Arneke, PA, David Badger and Associates, PA.

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