Some people come to see their income tax refunds as a yearly bonus. In reality these refunds are usually caused by a taxpayer having paid too much in taxes during the past year. Sometimes people have even 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 the bankruptcy court may seize part or all of their refunds. How might this be avoided?
Tax refunds and bankruptcy: The first thing someone looking to file bankruptcy must understand is the idea of the “bankruptcy estate.” Every asset they have, or have the right to receive, at the time they file their bankruptcy is filed is considered a part of the bankruptcy estate. Every asset, to the extent not considered exempt, is subject to being taken by the bankruptcy trustee to distribute to the debtor’s creditors. Avoiding this taking of assets is one of the goals the person looking to file for bankruptcy, and should be the goal for an experienced bankruptcy attorney.
The best way to avoid loss of tax refund in Utah 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 bankruptcy filer in Utah. Let us help you become aware of what you can and cannot do with any refund you might be eligible for this year. In our first consultation we can help you make the decision on when to file for your income tax refunds and bankruptcy.