Keeping Your Tax Refund After You Filed Bankruptcy
Tax season can be an exciting time of the year for those who are expecting a large refund but if you are set to file bankruptcy, you may wonder if your refund will be targeted by the bankruptcy trustee. While your tax refund may be considered an asset, it is possible you may be able to keep your refund but it may depend on different factors such as when you file your tax return, when you file bankruptcy and what chapter you plan to file.
It's common for debtors to be concerned about their tax refund being turned over in bankruptcy. In many cases, a debtor may be expecting a refund but have it spent prior to filing. If you are in the process of filing bankruptcy it is something that should be discussed with your attorney who will review potential options. You may be able to have the funds from your refund used toward a retirement account or other essential expenses.
When you file bankruptcy you may be required to present tax information along with your income. You may want to look into how to keep the amount of your refund smaller by having your withholdings adjusted on your paycheck earnings. This helps you get more take home pay throughout the year so when you file your taxes your refund amount is reduced. This can be another option to discuss with a legal expert if you are planning to file bankruptcy in the near future.