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How Does Bankruptcy Affect My Tax Refund? | Tom Orr Law

How Does Bankruptcy Affect My Tax Refund?

How Does Bankruptcy Affect My Tax Refund?

The broad answer to that question is: Mostly no.

In general, tax refunds are considered to be part of the assets of your estate like money in the bank. Nj bankruptcy exemptions allow each person to exempt or protect up to $13,000 in any assets, including tax refunds. Absent other substantial assets, refunds are rarely a problem. If tax refunds create issues, solutions include:

  • Don’t have one. You can adjust your payroll deductions so that just the right amount is taken out to reduce your refund to zero or close to it.
  • Sent it BEFORE filing for bankruptcy. However, you must be careful about how you spend your tax refund money. First and foremost: do NOT spend it on luxuries or acquiring new hard assets (possessions). You must spend it on necessary living expenses such as rent, mortgage payments, food, utilities, clothing, educational expenses, medical/dental expenses, insurance and the like. Do not use tax refunds to pay debt that will be included in your bankruptcy petition.

In chapter 13 bankruptcy, payments are made to a trustee, usually to catch up delinquent mortgages, taxes and car loans. you must show a budget with sufficient income over expenses to cover the trustee payment. The inclusion of tax refunds as income will yield unexpected results. The best solution is to adjust your withholding to ensure that you have only a minimal refund.

YOU’RE NOT ALONE

Hundreds of thousands of Americans, including consumers and business owners, file for bankruptcy each year. While many think this situation is the result of overspending, most cases are due to financial hardship such as job loss, costly medical bills, divorce, or a poor economy.

EVERYONE DESERVES A FRESH START

I’ve been practicing bankruptcy law in Burlington, New Jersey for over 33 years. With just one location, I can focus exclusively on helping my clients make their way not only through bankruptcy, but well past it. We will work together to explore all of your options and determine if bankruptcy is the right choice for you. The goal is to get you on the path to a new beginning.

SCHEDULE A FREE CONSULTATION

If you’re losing sleep, feeling scared or even embarrassed, let’s talk. There is life after bankruptcy and it starts here. My offices are located in downtown Burlington, near the Riverline train stop. I provide Saturday and evening hours as needed. I offer payment arrangements to fit your budget. Contact my office today at ​​609-386-8700.

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Start your path towards a new financial beginning. Contact our offices today!
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