This is another important question that people in financial troubles are concerned about. If you are among them, find out what will happen to your tax refunds after bankruptcy.
Impact of Chapter 7 Bankruptcy on Your Tax Refunds
Keep in mind that in this type of bankruptcy, the court takes over all your assets and property. Their aim is to liquidate them as much so that all your debts can be paid. The questions that whether you can keep your tax refund depends on the year when you earned it. Also, the time of filing bankruptcy is crucial in this regard. To simplify things, consider the following two cases;
- Tax refund received on income earned BEFORE the year of bankruptcy: The bankruptcy estate will take over this type of tax refund. Also, it does not matter when did you receive it.
- Tax refund received on income earned DURING the year of bankruptcy: The tax refund that you received on income earned after filing chapter 7 bankruptcy will be yours to keep.
Impact of Chapter 13 Bankruptcy on Your Tax Refunds
In most of the cases, the tax refund goes to the bankruptcy estate. This is because it is easier for them to liquidate as compared to property. But there are ways that will enable you to keep it even during chapter 13 bankruptcy. For example, if you can prove that this cash is important for meeting your necessary expenses, the court will allow you to keep it. This is where a bankruptcy attorney comes in.
If you missed my last blog. “What Will Happen to Your Taxes After Bankruptcy”, click here. More information can also be found on IRS.gov.
If you are finding it difficult to manage all the pressure that comes with filing bankruptcy, consult the professionals for best legal advice. Book an appointment now and we will find the best possible solution for bankruptcy issues.