Does Bankruptcy Protect Income Tax Refunds?
January through April is tax season and like many consumers you may be anticipating a tax refund. If you plan on filing bankruptcy during this time period, you may have concerns about how you can protect your refund from creditors. While many debtors may not want to disclose they are expecting a refund in fear of it being seized by the trustee, telling your bankruptcy attorney should be a priority.
Whether you have filed your bankruptcy case or you are considering filing for protection sometime during tax season, you should tell your attorney you are expecting a refund. Depending on your state, you may qualify for exemptions that can protect your tax refund from creditors. Each state has a certain exemption amount that can be applied toward personal assets. Your refund may also qualify for protection if it includes a child tax credit or earned income credit.
When it comes to tax refunds and filing bankruptcy it is important to review details with your attorney. If you have not filed for bankruptcy yet, you may be advised to wait until you have used your refund. It is common for tax refunds to be used to meet family needs and necessities.
If you decide to withhold tax refund information from your attorney or trustee, this could result in legal consequences. Your refund could go straight to your trustee from the Internal Revenue Service if the trustee submits a request. To understand your protection options it is best to disclose to your bankruptcy attorney you are expecting a refund.