Wondering how bankruptcy will affect your tax refund?

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Wondering how bankruptcy will affect your tax refund?

 

It’s tax season again, and we’re getting a significant number of calls from people wondering what will happen to their tax refund if they file for bankruptcy.

It really depends on two factors – what type of bankruptcy you’re filing and the size of your refund. With a Chapter 7 bankruptcy, most of the time your refund will be protected because it’s considered an asset. If you’re filing for bankruptcy during tax season, make sure you work with your attorney to be sure you’re maximizing your refund. When our clients are filing for bankruptcy around tax season, we typically encourage them to wait and file after they get their refund – then they can use that extra money to help with the cost of the case.

In some cases, we advise our clients to wait and file after they receive their refund, so they can use it to pay upcoming bills or your mortgage.

With a Chapter 13 bankruptcy AND a refund over $2,000, your trustee will have access to your tax refunds. In these situations, we work with our clients to reduce their tax refund so they’re able to keep the entire refund.

If you’ve filed for an extension so that you can file your taxes later in the year, you have several options available to protect your refund. If you reduce the amount that you withhold from your paycheck, your refund will be lower when you file.

If you contribute to an IRA or a 401k plan, you could increase your contributions to your retirement plan.

If you’ve got questions about your income tax refund and filing bankruptcy, please give us a call at 214-760-7777. We’ll walk you through all of your options and help get you the most out of your refund, so you can get the fresh start you deserve.

About the Author:

Mark is dedicated to helping families in North Texas through difficult financial problems. He insists on a personal touch that most bankruptcy attorneys in Dallas are too busy to provide. Call today for a free consultation and speak directly with Mark.

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