Many people have questions about bankruptcy and tax refunds. Some come to see their income tax refunds as a type of yearly bonus. In reality these refunds are usually caused by having paid too much in taxes during the past year. Many times people come to rely upon these refunds for planned yearly spending to catch up on bills, go on vacation, buy necessities, etc. Because of this reliance upon income tax refunds, those looking at filing for bankruptcy are often dismayed to find that during the bankruptcy process the bankruptcy trustee may seize part or all of their refunds. How might a bankruptcy and tax refunds problem be avoided?
One of the first thing someone looking to file bankruptcy must understand is the idea of a “bankruptcy estate.” Every asset they have, or have the right to receive, at the time you file a bankruptcy is considered a part of the bankruptcy estate. Every asset, to the extent that it is not considered exempt, is subject to being taken by the bankruptcy trustee to be distribute to the debtor’s creditors. One of the main goals of your attorney should be to voiding this taking of assets. This time of year, early January to mid-March is they time to prepare to deal with the possibility of a bankruptcy and tax refunds. This is one of the main reason you should be working with an experienced bankruptcy attorney.
As I have said before the best way to avoid loss of the refund is to work with an experienced bankruptcy attorney. At the Law Office of Douglas Barrett, LLC we can help you determine when to file your tax return and when to file for bankruptcy protection. There are a many, many, many possible pitfalls for the unsuspecting filer of bankruptcy in Utah. Don’t be one of the hundreds of people that loose their tax refunds in their bankruptcy each year because they did not have solid legal advice given to them by their attorney before they filed their Utah bankruptcy case.