Is my 2012 tax refund protected if I file a bankruptcy case?

As an Asheville bankruptcy lawyer, I help people protect various assets.  This is called exempt property.  In over 90 percent of the Chapter 7 bankruptcy cases I file, all of the property my clients own fits within the North Carolina or Federal Bankruptcy exemptions.  They get to keep all their property.

You can protect your tax refund through exemptions

One type of asset I frequently protect for clients is their tax refund.  Usually, we use a ‘wildcard’ exemption which is $5,000 per filer in North Carolina ($10,000 for a married couple filing jointly).  Keep in mind that North Carolina exemptions also include an additional two months’ wages if your spouse or child lives with you.  So, money set aside for emergencies can usually be protected too.

Beyond exemptions, one way to protect your tax refund is to spend it before we file your case.  You can use your 2012 tax refund to pay for a Chapter 7 bankruptcy case.  Medical expenses (dental work, chiropractor, etc.), neglected car repairs, and other things necessary for the maintenance of your household can also be purchased on the eve of bankruptcy if your cash reserves exceed exemption limits.

Instead of using your tax refund to make minimum payments on credit cards for a few months, doesn’t it make more sense to use that same money to wipe out all of your unsecured debt?  If you are in Western North Carolina, contact me for a free, initial bankruptcy consultation to get your questions answered and to develop a long-term solution to your debt problems.

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