What Happens to My Tax Refund if I File for Bankruptcy?

When it comes to April 15th, you either love the date because you anticipate a tax refund from the IRS or you hate the date because you will have to pay. But what happens if you are one of those people who are anticipating a refund but you have also filed for bankruptcy? Whether you have filed a Chapter 7 or a Chapter 13 bankruptcy petition, it is not certain that you will be able to keep your refund amount.

While it may be the case that petitioners who have filed a Chapter 7 bankruptcy are more likely to keep their refunds than those who filed for Chapter 13 protection, it is never a guarantee. Factors that influence whether a petitioner can retain his or her refund, or whether it has to be forfeited to the trustee, including the timing of the filing of the bankruptcy petition and whether the petitioner took any steps beforehand to protect the potential refund.

Tax Refund in Chapter 7

For those filing for Chapter 7 protection, their tax refund is considered an asset, whether they have already received it or not. Since Chapter 7 bankruptcy allows for certain assets to be exempt, a bankruptcy lawyer can advise you if your tax refund can be listed as exempt in your filing, and, if so, what amount.

If you have already received your refund before filing for bankruptcy and are unable to list the refund as exempt in your Chapter 7 petition, it is important to consult with your bankruptcy lawyer as to what to do with your refund. You may want to consider postponing your filing and spending the refund on necessities or using it to pay your attorney fees so that it no longer can be considered an asset. The way in which you spend your refund matters in this case, so having an experienced attorney’s guidance on how to proceed is crucial.

If you have already filed your bankruptcy petition and are expecting a refund, you may still be able to avoid listing the refund as an asset in certain situations. It is advisable to consult with your bankruptcy lawyer on the strategies for doing so in order to best improve your chances of keeping the refund. 

Tax Refund in Chapter 13

Those who have filed for Chapter 13 protection and are currently in a bankruptcy plan will have to defer to the trustees of the plan to discover what portion, if any, of their refund they will be allowed to keep. Under Chapter 13, the refund will likely be considered disposable income and the trustee may choose to keep the entire refund, especially if the plan does not allow for the entire amount of debt to be paid back to creditors.

However, since the trustee has discretion in allowing you to keep your refund or not, there are certain circumstances under which you may be more likely to keep your refund or at least a part of it. With the help of a bankruptcy lawyer, you may be able to show that special circumstances warrant you keeping your refund.

Contact a Bankruptcy Law Firm Today

If you are struggling with debt and considering bankruptcy, call an experienced attorney.

Each person’s financial situation is different from another’s. And while you may feel like your finances haven’t been so great, at what point should filing for bankruptcy be seriously considered? If you have wondered about whether bankruptcy is the next step to take, just know you are not alone. There are so many individuals and families that are struggling financially right now. But knowledge is powerful, and the more you know, the more options become available to you that you hadn’t thought was possible before. 

Is it my budgeting that caused my finances to suffer?

If you have expenses that consistently exceed what you earn, then eventually you may find yourself without any funds at all and are not sure what to do next. Some people can benefit from budget counseling and reassessing their spending. But for those who’s expenses and debts are vastly more than their earnings, and a pay raise or job change isn’t in the near future, then more may need to be done than just a change in budgeting. 

What can I do about my medical debts?

Do you have medical bills that you cannot afford to pay? Do you not earn enough each month to afford medical benefits in the first place? Healthcare costs can be steep, as a bankruptcy attorney from The Law Offices of Ronald I. Chorches know, so it can be easy to fall behind on paying them. Bankruptcy can help you get your healthcare costs or debts more under control. Most medical bills are dischargeable, which means you will be better able to afford medical care costs from there on out. 

I was a victim to a scam, how can I get out?

A person with plenty of debt is someone that is also vulnerable to being taken advantage of. Sadly, because someone may be desperate for money, they may fall prey to scammers who want to further ruin their financial stability. If you were called by someone who ended up being a scammer, bankruptcy may be able to help you. Remember, bankruptcy in itself is not a scam. In fact, it is a useful resource for people to depend on when they are in such financial hardship that it seems impossible to recover.  

What other ways is bankruptcy beneficial?

Mental health is a topic that should always be treated seriously. When finances are not where people want them to be, it can make them feel down on themselves and unable to live the life that they imagined for themselves. As the team from The Law Offices of Ronald I. Chorches understands, bankruptcy not only alleviates debt issues, but can help someone feel better about who they are and their options for the future. If finances have caused you to lose sleep at night, affected your personal relationships, or otherwise caused mental stress, then it may be time to consider bankruptcy. 

When tough financial times hit, it can feel like there is nothing that can help us. But don’t forget that bankruptcy is a resource that is available to those who truly need a financial restart for their future. 

Chapter 7 Bankruptcy Lawyer  

Stopping Eviction by Filing for Chapter 7 Bankruptcy

When you stay in possession of an apartment or leased property after the expiration or termination of the lease, and you refuse to leave, your conduct, in the eyes of the law, is defined as an unlawful detainer. These actions are common when the landlord of the property is attempting to evict tenants that do not pay rent or expose the property or other tenants to danger. Landlords are required to use this process because under state law, they are not permitted to engage in any self-help remedies to remove a tenant who refuses to leave.

In the legal system, these types of cases are called unlawful detainer actions. If the landlord wins an unlawful detainer case, the court will issue a writ of possession. The sheriff of the county will serve the tenant that is refusing to leave. The writ of possession notifies the tenant that they must leave the apartment by a certain time period or the sheriff will forcibly remove the tenant. However, a Chapter 7 bankruptcy lawyer may be able to help.

Filing for Bankruptcy

The moment you file for bankruptcy, an automatic stay is entered in your case for 30 days and it immediately prevents lawsuits and collection actions against your property, specifically including foreclosure and eviction proceedings. This is where bankruptcy may come in handy to fight eviction proceedings.

The timing of the bankruptcy proceedings is crucial to fighting the unlawful detainer action and writ of possession:

• If you file for bankruptcy prior to the landlord serving you with notice of the unlawful detainer action, the landlord must persuade the bankruptcy court to lift the automatic stay before he can evict you.
• If you filed for bankruptcy after the unlawful detainer action is filed, but before a writ of possession is issued, the landlord must wait until the stay is lifted or seek relief from the court by lifting the stay.
• If you filed for bankruptcy after the court entered a writ of possession, the automatic stay will not bar the sheriff from enforcing the writ of possession. But the landlord can only seek possession of the property, not money damages. 
• If you have not paid your rent in some time due to financial hardship and are afraid of being evicted from your apartment, you should consider filing for bankruptcy. Once your landlord files an eviction lawsuit, and you file for bankruptcy thereafter, the bankruptcy judge will most likely lift the automatic stay to allow the eviction to move forward, especially if the court already issued a writ of possession. Furthermore, it might be easier for the landlord to lift the automatic stay if the landlord proves that you will endanger the property or use illegally controlled substances on the property.

Contact a Bankruptcy Law Firm Today

If you are late on rent due to the large amount of debt you have, and it is only a matter of time before your landlord will move to evict you, you should contact an experienced attorney.

Bankruptcy Attorney

If you are facing financial difficulties it is essential to know what happens and what doesn’t happen in bankruptcy before deciding to file for a bankruptcy case. There is no doubt that if you’re experiencing severe debt problems filing for bankruptcy can be a very powerful remedy. Many people don’t know what bankruptcy can handle and what it doesn’t. Depending if you file a Chapter 7 or Chapter 13 will depend on what bankruptcy can and cannot do for you.

Continue reading for an informational overview about what bankruptcy cannot do for you if you are considering filing.

Things Bankruptcy Can’t Do

Bankruptcy is a great tool to use in helping solidify that there are some things that bankruptcy cannot cure. Here is what it can’t do for you.

Bankruptcy doesn’t prevent a secured creditor from foreclosing our reprocessing property you can’t afford.

 A bankruptcy discharge does eliminate debts but it doesn’t eliminate liens. A lien allows the lender to take the property, sell it at auction, and applied the proceeds to a loan balance. While bankruptcy can eliminate your obligation to pay the debt, assuming you have secured debt, it will not take the lien off your property. In Chapter 7 you can wipe out a home mortgage but the lender’s lien will remain on the home. As long as the mortgage remains unpaid the lender can’t exercise its lien rights to foreclose on the house once the automatic stay lifts. 

Bankruptcy doesn’t eliminate child support and alimony obligations.

 Child support and alimony obligations survive no matter which chapter of bankruptcy you file. You will have to continue to owe the stats in full just as if you have never filed for bankruptcy. If you use Chapter 13 will have to pay these debts in full through your plan.

Bankruptcy does eliminate student loans except in limited circumstances.

 If you’re hoping that you can get your student loans discharged in bankruptcy then you are going to be in for a surprise. Student loans can only be discharged in bankruptcy if you show that repainting the loan would cause you undue hardship. You must prove that you can’t afford to pay her loans currently and that there is very little likelihood you can do so in the future. For many people, this doesn’t happen and you will need to pay your student loans.

While there aren’t many things bankruptcy can do there are many things that simply can’t. Before you file for bankruptcy is important that you know what to expect. This is why we suggest reaching out to bankruptcy attorney like our friends at The Law Offices of Ronald I. Chorches, for a better understanding of what you can expect if you decide to file for bankruptcy.