Will I Be Able to Keep My Tax Refund After Bankruptcy?

Will I Be Able to Keep My Tax Refund After Bankruptcy

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If I file for bankruptcy, what's going to happen to my tax refund? Many bankruptcy attorneys reading this will chuckle, because the answer, as it often is with bankruptcy, is that it depends. There are several factors like when you receive your tax refund and which chapter of bankruptcy you file. It also depends on your specific situation. There are a lot of bankruptcy attorneys taht will give that as a "blanket" answer, I know how annoying that can be. So I'm going to break this down here as much as I can.In Chapter 7 bankruptcy, exemptions are written into state law that may allow you to keep some or all of your tax refund. If you are filing for a Chapter 13 bankruptcy, the courts will require your tax refund during the plan to be paid to the trustee as a part of your plan. If there are any back taxes you owe to the government, the IRS has the power to take your tax refund and apply it to the debt. There are some instances where they can still take it even if you aren't filing for bankruptcy. Your other creditors may even be able to get a hold of your money by garnishing your wages or your cash by levying your bank accounts. Whether or not you hire a bankruptcy attorney, if you know that you are under a bank levy then you might not want to have your refund check directly deposited.Of course, there may be some ways around this. There are states where local laws allow you to keep some or all of your tax refund, but you first must receive permission from the court. If you keep it without going through the proper process, the Chapter 13 Trustee could ask the Court to dismiss your case. An experienced bankruptcy attorney can help you to determine exactly what you qualify for with your plan, and, they'll do it so you can keep as much as is allowed by the law. Don't forget: bankruptcy is a federal law designed to help people get out of debt, not stay in it. Many responsible, hard-working Americans use their tax refunds to pay off their debts anyway. You can get out from under debt, get protectino from foreclosure, stop wage garnishments, and prevent your car from repossession with bankruptcy. What other system has the power to do that for you and your family?

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