One of the top concerns of most people who come to meet with me about filing bankruptcy is whether they will lose any of their property. During tax season, the concern about tax refunds in bankruptcy becomes a bigger issue as people fear losing their tax refunds if they file bankruptcy.
Many families depend on their tax refunds each year to pay bills, make needed repairs and pay for other expenses that they are unable to afford during the year. Losing their tax refunds in bankruptcy would be devastating; however, putting off filing bankruptcy may not be in their best interest. Stopping repossessions, foreclosures, garnishments and judgments may take priority over worry about losing tax refunds in bankrjtpcy.
Losing Tax Refunds in Bankruptcy
Yes, in a few cases, debtors may lose tax refunds in bankruptcy or they may lose a portion of their tax refunds; however, that is not the typical case. In almost all of bankruptcies filed in New Jersey, the debtors do not lose any of their property. Even in a case where the debtor must surrender some or all of a tax refund, that is severely outweighed by the fact that the debtor wiped out thousands of dollars in debt. In some cases, the trade-off may result in stopping a garnishment or levy, saving a home or preventing a repossession. In those cases, losing their tax refunds in bankruptcy was a small price to pay for the financial benefits of filing the bankruptcy case.
In most cases, we can prevent debtors from losing their tax refunds in bankruptcy by claiming them as exempt. Most debtors are able to claim their entire tax refunds as exempt. Exempt property is not subject to the creditors or the bankruptcy trustee. In the few cases where the exemption is not sufficient to cover the full amount of the tax refunds, the debtor may choose to surrender just the portion that exceeds the exemption in order to file the bankruptcy case immediately.
In other cases, we may be able to time the bankruptcy filing so that the debtor does not lose their tax refunds. If the debtor can wait until after he or she has received the tax refunds and used them on “normal” living expenses, the debtor will not lose any of the tax refunds.
Filing Bankruptcy with Tax Refunds
Protecting your assets while wiping out debt is our top priority. We have many tools that we can use in order to accomplish this goal; however, we are unable to help you unless you come into our office for a free consultation. Once we understand your current financial situation and concerns, we can then work to find an affordable solution to your financial problems that protects your assets while giving you a fresh start free from the burden of unpaid debts.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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