As an Asheville bankruptcy attorney, Spring is my busiest time of year. Tax refunds are a reason bankruptcy filings go up. Why spend refund money on credit card minimums when you can wipe out your debt by filing a Chapter 7 case? With careful planning, you can file for bankruptcy and keep your tax refund.
We need to list all of your assets.
The right to receive your 2012 tax refund is an asset of your bankruptcy estate. However, by protecting it with exemptions, we can prevent the Chapter 7 trustee from seizing it for the benefit of your creditors. Generally, in North Carolina, we do this by protecting the anticipated refund with your wildcard exemption ($5,000 per spouse, $10,000 for married couples). By properly claiming your exemptions, you are free to spend your refund as you normally would.
But, I have a large tax refund and I need to use my wildcard exemption on other property I own.
In my bankruptcy practice, a big part of my job is helping clients figure out the best possible strategy for financial success in their fresh start. One way to protect a large refund is to spend it prior to filing on non-luxury items. You can get the dental care you need, new tires for the car, make your mortgage payment, or pay for your bankruptcy filing. Timing your bankruptcy case properly is critical to achieve the fresh start the bankruptcy code says you are entitled to.
Do not pay back family members, make large payments to other creditors, or transfer your tax refund to someone else. These are called preferential payments and can complicate your bankruptcy filing.
If you are ready to sit down for 30 minutes to discuss your bankruptcy options, please contact me for a free, initial bankruptcy consultation in my Asheville, NC office.
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