April 15 has passed leaving the tax season behind us. At least for some of us. Many Americans depending on when they filed their return might still be waiting for their refund. Individuals who are financially distressed and are considering filing for bankruptcy or already filed for bankruptcy, need to beware of what happens to their tax return. First of all, if you're not getting anything back you have nothing to worry about. But, if you're currently in the process of filing bankruptcy and are expecting a return it might just end up in the hands of the bankruptcy trustee.
This, along with many other reasons is why it's important to have a bankruptcy attorney. To the average individual, who doesn't understand the bankruptcy code, timing when to file bankruptcy is of utmost importance. A bankruptcy attorney stands back and looks at the entire picture, income, expenses and even the possibility of a tax refund that might come in during the filing. A tax refund can have a definite impact on your bankruptcy filing. Planning your bankruptcy can have an effect on your exemptions, income and assets.
A bankruptcy attorney knows the ins and outs of the code and will know the exact time to pull the trigger and file. If they know the intricacies of the case including all your personal information, they can foresee a potential problem and work around to correct it.
The only time the bankruptcy trustee will not go after an income tax refund is in the case of a married couple filing individually. If the debtor filed a joint tax return, with the refund coming back to them and the debtor was filing for bankruptcy as an individual, then the bankruptcy trustee could not take the entire refund. The bankruptcy trustee cannot force a non-filing spouse to abide by the court order that was imposed on the spouse was filing bankruptcy. The bankruptcy court believes that they would be imposing hardship on the non-filing spouse.
This would be another question for the debtor to ask your bankruptcy attorney. To avoid all the confusion in some cases it might be best to file your tax returns as married filing single. All situations are different and should be closely looked at by the attorney.
This reiterates when filing for bankruptcy, timing and planning is everything. Some people would qualify to file Chapter 7 bankruptcy at some point in the year depending on how they are paid. For example, a realtor might only sell one house a year and make $50,000 commission. If the realtor tried to qualify under the means test to file Chapter 7 shortly after receiving the commission they would not qualify because their income is too high. If they waited six months and got out of the looked back period their income would virtually show up as zero, even though they will make $50,000 that year. The moral of this story is, the knowledge of bankruptcy attorney has can be invaluable protecting their clients assets.
The author started FilingBankruptcyNow.Com which is a website that helps individuals with debt problems by putting them in touch with a local bankruptcy attorney that specializes in bankruptcy under Chapter 7 and Chapter 13 bankruptcy. Check our website for more answers to bankruptcy questions and ideas on how to have a debt free future.
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