Keeping Tax Refunds out of Bankruptcy
After completing a tax return, a person who paid more than their fair share of taxes may be eligible to receive a significant amount of money back from the government in the form of a tax refund. These refunds pay according to how much more a person paid in taxes than they needed to that year. However, these refunds are considered a form income, and may complicate both Chapter 7 and Chapter 13 bankruptcy as a result.
If you’re unsure about how an unexpected form of income may affect your bankruptcy proceedings, we may be able to help you better understand how bankruptcy works. For more information about this process and how we may be able to assist you with your case, contact Florida bankruptcy attorney Ryan J. Really, Attorney at Law, PLLC, today at (239) 237-0675.
Protecting Tax Refunds and Keeping Repayment Plans Simple
Depending on what type of bankruptcy a person is filing, a tax refund may affect their case in two major ways. In Chapter 7 bankruptcy, a tax refund may be seized by the bankruptcy trustee and used entirely to pay back creditors. In Chapter 13 bankruptcy, a tax refund may be called a form of income, and a person’s repayment plan may be altered to reflect this. However, these complications can be avoided in the following ways:
- If less tax is withheld, a tax refund may be smaller and have less impact on bankruptcy proceedings
- Refunds through Earned Income Tax Credits may not be cited as income for repayment plan modification purposes
- By moving income otherwise received through a refund into a 401k, a Chapter 13 repayment plan may go unaffected by a refund
- For Chapter 7 bankruptcy, a tax refund may be exempted through a wild card exemption
These strategies may not be appropriate for all debtors, however. Debtors may wan to consult with a legal professional to learn more about their specific tax refund options.
If you’re facing debt that you simply can’t manage any longer, we may be able to step in and help you through the process of filing for bankruptcy protection. For a free consultation with an experienced legal advisor regarding your options, contact Florida bankruptcy lawyer Ryan J. Really, Attorney at Law, PLLC, by calling (239) 237-0675 today.