When tax season approaches, knowing your rights regarding your tax refund when filing bankruptcy is of great importance. There are several different factors when it comes to how to protect your tax refund in bankruptcy. The type of bankruptcy you file, exemption laws, the source of the refund, and the timing of the filing of your bankruptcy case all can make a difference in keeping your refund.
We know many people depend on their tax refunds to get their families through the year. That’s why our bankruptcy firm fights for every tax return dollar that our clients filing bankruptcy in Lebanon Missouri get to keep and thoroughly advises our bankruptcy clients of their options.
When it comes to protecting your tax refunds when filing bankruptcy, proper planning is the key. For some debtors, it may be necessary to file their bankruptcy after their refund is received and for others filing prior may be the better option. Our knowledgeable bankruptcy attorneys have the answer.
Another key factor is the type of exemptions that are used to protect your property. The majority of our clients are required to use Missouri exemptions which have conservative limits. The value of these exemptions can vary based on your household size and whether the case is jointly filed by two debtors, a married couple, or an individual filing.
And finally, the origination of the refund will make a difference. If the refund stems from Earned Income Credit or Child Tax Credit then the right exemption will protect all of that portion of the refund.
Any portion of the refund that stems from overpayment will have to be prorated based on the bankruptcy filing date and protected by using other exemptions if they are available. The complexity of the tax refund issue can seem daunting if you try to figure out the best option on your own. Seeking legal advice from our qualified bankruptcy attorneys can mean the difference between keeping the refund or paying it to your creditors.