Can I Keep My Tax Refund If I File Bankruptcy?

At this time of year thoughts start to turn towards filing taxes, as your tax documents start to trickle in from your employers, mortgage lender, student loan servicer, and others. Depending on your circumstances and tax bracket you might be entitled to a tax refund. And if you are like most people who anticipate a refund, you probably have plans for how it gets spent. But if you are too far behind on your bills to make any real headway by paying down a credit card or two with your refund, you might also be considering filing for bankruptcy. This naturally raises the concern of whether you are allowed to keep your tax refund if you file for bankruptcy.

The answer depends on what type of bankruptcy you file, and the amount of your refund. In some cases the amount will not be enough for the trustee to ask be turned over to the Bankruptcy Court, but that is not always the case. Here are some other helpful tips about how to handle your tax return if you need to file bankruptcy:

•         Timing is everything, so before you file your return you might want to talk with a bankruptcy attorney.

•         If you have filed a bankruptcy, but not your taxes, the Court will likely ask that you simply have your returns prepared and then sent to the tax representative on your case for filing. This will speed up the filing process, which helps move your bankruptcy case along as well.

•         If you have filed taxes, received a refund, and spent the refund you can still file bankruptcy. You may have to account for how you spent the money, so keep track of your purchases or make a note of which debts you paid with the refund.

Taxes are tricky, and getting it right when you need to file bankruptcy too can be a tall order. If you have questions about how the relationship between income taxes and bankruptcies, call our office for answers.

For help with bankruptcy issues, call us today or reach us online at www.law-ri.com. We have multiple locations to serve you and can schedule a time to meet at the office most convenient for you.