Is My Tax Refund Safe In Bankruptcy?
This time of year a lot of workers’ thoughts turn to whether they will get a tax refund, or have to pay in a bit more to Uncle Sam. For those of you that do get a refund, it can be a real boost to your finances, allowing you to put some money aside for a rainy day or to pay off existing debt. But if your debt load is such that it cannot be eliminated with a tax refund, you might be thinking about filing for bankruptcy. But you may not have stopped to think about whether your tax refund will still be yours if you do file a bankruptcy case. The answer depends on your specific facts, but there is a chance you will not get to keep any tax refund you have coming to you if you file bankruptcy.
The way your tax refund and bankruptcy work together goes something like this:
• When you file a bankruptcy case you will have to appear at a hearing in front of the Trustee assigned to your case shortly after filing. The purpose of this initial meeting is to take your testimony as to what lead to your need to file, and allow any creditors to ask your intentions regarding their debt. This meeting is informal and most people do not find the experience difficult. But one question you should be prepared to answer is whether you’ve filed taxes.
• If you have not yet filed your taxes and the date for doing so has passed, you will be required to finalize your return and get a copy of it to the Court.
• The Trustee will likely advise you to hang on to any return you get, while he or she determines if the return is property of your bankruptcy case and thus should be given to the Trustee to pay some of your debt.
• If you have filed and already received a refund that has been spent, just be prepared to let the Trustee know how the funds were spent. In most cases refunds are used to pay bills, and that is perfectly fine. The key is to be honest and give accurate answers.
If you are having a hard time paying all of your bills, don’t let the tax man stop you from taking charge of your money. Filing bankruptcy and dealing with tax issues is something we can help you with, call us to find out more.
For more information about taxes and bankruptcy, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.