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The tax season is upon us, and the tax deadline is coming up on April 15th, 2021. Many of us are looking forward to receiving a nice-sized income tax refund check. But, for people thinking about bankruptcy, there are many questions to consider.
- What happens to your tax refund check if you plan to file for bankruptcy?
- Can you lose your tax refund?
- Should you wait to file your taxes?
In this article, Wynn at Law, LLC’s bankruptcy attorney Shannon Wynn explains how you can file for bankruptcy and keep your income tax refund.
Should I wait to file my income taxes if I am considering bankruptcy?
Are you contemplating filing for Chapter 7 or Chapter 13 bankruptcy this year? If so, you may be wondering about the best timing for your bankruptcy. One common consideration is if it is better to file bankruptcy before or after filing your income taxes.
Each individual’s situation is unique. A bankruptcy attorney can help you decide when is the best time for you to file.
Generally, Wynn at Law, LLC’s bankruptcy attorney, Shannon Wynn, recommends filing your bankruptcy petition after filing your income taxes. In most cases, this is the best scenario. If you file for bankruptcy before filing your 2020 income taxes, the bankruptcy trustee may request you file your 2020 taxes quickly after your bankruptcy filing. Filing your taxes prior to filing bankruptcy, will also help your bankruptcy attorney give you the best advice on any refunds you are entitled to receive from the state or federal government.
Your income tax refund and the bankruptcy estate
Your bankruptcy estate consists of all the assets you own when you file your Wisconsin bankruptcy case. Your income tax refund amount is included in your bankruptcy estate. That means the bankruptcy trustee may be able to use the refund to pay your creditors, whether you have already received the check or if you are still expecting the refund check.
It is possible to protect your income tax refund check from the trustee, but that will depend on the allowable amount you can exempt by law and is influenced by the other assets you need to exempt. It is essential to consult with a bankruptcy attorney to pre-plan your bankruptcy estate and exemptions.
Ways to keep Your income tax refund check when filing for bankruptcy
You can spend your tax refund prior to filing bankruptcy without getting into trouble with the bankruptcy trustee if you spend it the right way. This list includes living necessities, such as mortgage payments or rent, food, car repairs, and a few others. Ask a bankruptcy attorney what expenses qualify.
It is important to remember that some expenses and utilities can be paid, such as medical bills, but may not be a good idea to pay prior to filing bankruptcy. Once you file your bankruptcy, you may not be responsible for repaying those creditors. You must choose the best way to spend your tax refund, and it is wise to do so under the advice of a bankruptcy attorney.
A bankruptcy attorney can help protect your tax refund
The absolute best way to avoid losing your income tax refund is to talk to a bankruptcy attorney. It may be worthwhile to use your income tax refund to pay your bankruptcy attorney fees if you plan to file for bankruptcy. If you are hiring an attorney to help with your bankruptcy case, which you should, you need to pay your bankruptcy attorney before filing your bankruptcy case. With your tax refund, you can pay your bankruptcy attorney upfront in one lump sum and start your case faster. This is especially beneficial if you are having a hard time raising the money for the cost of filing bankruptcy.
Things to avoid doing with your tax refund when filing for bankruptcy
You must not spend the income tax refund money frivolously. Never purchase luxury items or spend the money on loan repayments to your family and friends. Doing so can cause the trustee to require the repayment of the money.
People can often spend their tax refund money before filing for bankruptcy. File your taxes, receive your check, spend the money, and then file your bankruptcy. However, it is vital to keep a record of exactly how the money was spent. The bankruptcy trustee has the right to ask you.
Can bankruptcy eliminate income tax debt?
It is possible to discharge some Federal and Wisconsin income tax debt by filing for bankruptcy. However, the debt must meet specific qualifications:
- Federal or state income taxes only.
- Tax returns must be filed on time – despite not paying the balance due.
- The tax debt must be at least three years old. (If you are expecting to owe money for your 2020 income taxes, it will not be dischargeable because the debt is less than three years old.)
- The IRS’s income tax debt must be assessed at least 240 days before you file or must not have been assessed at all (240- Day Rule).
Once your qualifying tax debt has been discharged through bankruptcy, you are no longer responsible for paying back the taxes and any penalties assessed on your tax debt.
Do I need to file my income taxes?
Yes. The bankruptcy trustee will require you to provide copies of (at least) the last 2 years of income taxes.
Contact Wynn at Law, LLC’s bankruptcy law office
If you are considering bankruptcy this year and have questions, please contact our bankruptcy attorney, Shannon Wynn. Wynn at Law, LLC offers free, in-depth bankruptcy consultations. Our bankruptcy attorney is here to listen, advise, and help during your financial difficulties. You can reach our bankruptcy attorney by phone at 262-725-0175 or by email via our website’s contact page. Wynn at Law, LLC has bankruptcy law offices conveniently located in Salem, Delavan, and Lake Geneva, Wisconsin.
The post Learn How You Can File Bankruptcy and Keep Your Tax Refund appeared first on Wynn at Law, LLC.
The tax season is upon us, and the tax deadline is coming up on April 15th, 2021. Many of us are looking forward to receiving a nice-sized income tax refund check. But, for people thinking about bankruptcy, there are many questions to consider.
- What happens to your tax refund check if you plan to file for bankruptcy?
- Can you lose your tax refund?
- Should you wait to file your taxes?
In this article, Wynn at Law, LLC’s bankruptcy attorney Shannon Wynn explains how you can file for bankruptcy and keep your income tax refund.
Should I wait to file my income taxes if I am considering bankruptcy?
Are you contemplating filing for Chapter 7 or Chapter 13 bankruptcy this year? If so, you may be wondering about the best timing for your bankruptcy. One common consideration is if it is better to file bankruptcy before or after filing your income taxes.
Each individual’s situation is unique. A bankruptcy attorney can help you decide when is the best time for you to file.
Generally, Wynn at Law, LLC’s bankruptcy attorney, Shannon Wynn, recommends filing your bankruptcy petition after filing your income taxes. In most cases, this is the best scenario. If you file for bankruptcy before filing your 2020 income taxes, the bankruptcy trustee may request you file your 2020 taxes quickly after your bankruptcy filing. Filing your taxes prior to filing bankruptcy, will also help your bankruptcy attorney give you the best advice on any refunds you are entitled to receive from the state or federal government.
Your income tax refund and the bankruptcy estate
Your bankruptcy estate consists of all the assets you own when you file your Wisconsin bankruptcy case. Your income tax refund amount is included in your bankruptcy estate. That means the bankruptcy trustee may be able to use the refund to pay your creditors, whether you have already received the check or if you are still expecting the refund check.
It is possible to protect your income tax refund check from the trustee, but that will depend on the allowable amount you can exempt by law and is influenced by the other assets you need to exempt. It is essential to consult with a bankruptcy attorney to pre-plan your bankruptcy estate and exemptions.
Ways to keep Your income tax refund check when filing for bankruptcy
You can spend your tax refund prior to filing bankruptcy without getting into trouble with the bankruptcy trustee if you spend it the right way. This list includes living necessities, such as mortgage payments or rent, food, car repairs, and a few others. Ask a bankruptcy attorney what expenses qualify.
It is important to remember that some expenses and utilities can be paid, such as medical bills, but may not be a good idea to pay prior to filing bankruptcy. Once you file your bankruptcy, you may not be responsible for repaying those creditors. You must choose the best way to spend your tax refund, and it is wise to do so under the advice of a bankruptcy attorney.
A bankruptcy attorney can help protect your tax refund
The absolute best way to avoid losing your income tax refund is to talk to a bankruptcy attorney. It may be worthwhile to use your income tax refund to pay your bankruptcy attorney fees if you plan to file for bankruptcy. If you are hiring an attorney to help with your bankruptcy case, which you should, you need to pay your bankruptcy attorney before filing your bankruptcy case. With your tax refund, you can pay your bankruptcy attorney upfront in one lump sum and start your case faster. This is especially beneficial if you are having a hard time raising the money for the cost of filing bankruptcy.
Things to avoid doing with your tax refund when filing for bankruptcy
You must not spend the income tax refund money frivolously. Never purchase luxury items or spend the money on loan repayments to your family and friends. Doing so can cause the trustee to require the repayment of the money.
People can often spend their tax refund money before filing for bankruptcy. File your taxes, receive your check, spend the money, and then file your bankruptcy. However, it is vital to keep a record of exactly how the money was spent. The bankruptcy trustee has the right to ask you.
Can bankruptcy eliminate income tax debt?
It is possible to discharge some Federal and Wisconsin income tax debt by filing for bankruptcy. However, the debt must meet specific qualifications:
- Federal or state income taxes only.
- Tax returns must be filed on time – despite not paying the balance due.
- The tax debt must be at least three years old. (If you are expecting to owe money for your 2020 income taxes, it will not be dischargeable because the debt is less than three years old.)
- The IRS’s income tax debt must be assessed at least 240 days before you file or must not have been assessed at all (240- Day Rule).
Once your qualifying tax debt has been discharged through bankruptcy, you are no longer responsible for paying back the taxes and any penalties assessed on your tax debt.
Do I need to file my income taxes?
Yes. The bankruptcy trustee will require you to provide copies of (at least) the last 2 years of income taxes.
Contact Wynn at Law, LLC’s bankruptcy law office
If you are considering bankruptcy this year and have questions, please contact our bankruptcy attorney, Shannon Wynn. Wynn at Law, LLC offers free, in-depth bankruptcy consultations. Our bankruptcy attorney is here to listen, advise, and help during your financial difficulties. You can reach our bankruptcy attorney by phone at 262-725-0175 or by email via our website’s contact page. Wynn at Law, LLC has bankruptcy law offices conveniently located in Salem, Delavan, and Lake Geneva, Wisconsin.
The post Learn How You Can File Bankruptcy and Keep Your Tax Refund appeared first on Wynn at Law, LLC.
Most people who proceed with filing bankruptcy cases do so to have their debts eliminated and have a fresh start financially. The different types of bankruptcy can help with financial problems either through liquidation of assets (that could wipe out debts) or through a creditor payment plan (as approved by the bankruptcy court).
Declaring bankruptcy is difficult without legal help from the right people. While filing bankruptcy can indeed enable you to have several types of debt discharged, note that your student loan debt will likely not be part of the list.
Pursuant to bankruptcy laws, most of your unsecured debts (such as credit card debt, medical debt, and personal loan debt) would usually be discharged after bankruptcy. Generally, a bankruptcy case would not exempt a bankrupt individual from being asked to pay off his or her student loan debt. However, if you filed for bankruptcy with the help of a reliable bankruptcy lawyer, your student loan could likewise be considered as a discharged debt.
In a bankruptcy filing, the trustee will check if the filer is indeed making payments for certain debts that the latter must pay back first. Part of the responsibilities of your bankruptcy trustee is to ensure that you pay all your priority debts (child support, alimony, criminal fines or penalties, or certain tax debt) first.
Even if student loans are considered as non-priority debts, discharging them through either a Bankruptcy Chapter 7 or 13 will require you to first prove undue hardship.
The specifics of bankruptcy rules could vary from court to court, and so do the criteria to determine undue hardship. The place where you filed for bankruptcy can be a major factor. Most bankruptcy cases, however, would likely involve two tests: the Brunner Test and the Totality of the Circumstances Test. These can be explained in more detail by credible bankruptcy lawyers.
Under the Brunner Test, student loan debts may be included in a bankruptcy petition if poverty, persistence, and good faith can be proven.
Poverty refers to how student loan debt repayment will affect your ability to maintain a minimal standard of living, as determined by your monthly income vis-a-vis living expenses. Persistence, meanwhile, refers to how your financial situation will not be improving significantly and you will still not be able to repay your student loan from your creditors. Lastly, good faith refers to how you have exerted significant effort to proceed with repayment of your student loan. This means that you have made attempts to pay lenders with what you owe for a certain period, but have not been successful due to several reasons, such as low income.
The Totality of the Circumstances Test, on the other hand, involves bringing to court every single paperwork that could be relevant or helpful to your petition for bankruptcy. The court will review your circumstances (as shown in these documents) and decide if, under bankruptcy law, undue hardship exists.
Make the most out of your would-be bankruptcy proceedings. For questions on the bankruptcy process, the different bankruptcy types, or how to file for bankruptcy, contact our law firm. Call us at Northwest Debt Relief Law Firm to consult with a reliable bankruptcy attorney.
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The post How Filing for Bankruptcy May or May Not Help with Student Loans appeared first on Vancouver Bankruptcy Attorney | Northwest Debt Relief Law Firm.
Chapter 7 Trustee Donald F King Donald F King is one of the four Chapter 7 trustees in the Alexandria Virginia Bankruptcy court. When you file a bankruptcy case in Alexandria, the computer assigns you to one of the four trustees. Lawyers are appointed Chapter 7 trustees as a part-time assignment. He’s a partner in […]
The post Chapter 7 Trustee Donald F King by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
Chapter 7 Trustee Donald F King Donald F King is one of the four Chapter 7 trustees in the Alexandria Virginia Bankruptcy court. When you file a bankruptcy case in Alexandria, the computer assigns you to one of the four trustees. Lawyers are appointed Chapter 7 trustees as a part-time assignment. He’s a partner in […]
The post Chapter 7 Trustee Donald F King by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
We’re Zooming Virtual Bankruptcy Consultations We’ve been Zooming–doing virtual bankruptcy consultations–since April 2020. We’ll continue through 2021. We stopped in-office consultations with the March 2020 pandemic lock down. (I first heard of Zoom when my church started using it. We’re a small congregation and can see everybody on screen.) Since April 2020 I’ve Zoomed bankruptcy […]
The post We’re Zooming Virtual Bankruptcy Consultations by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
We’re Zooming Virtual Bankruptcy Consultations We’ve been Zooming–doing virtual bankruptcy consultations–since April 2020. We’ll continue through 2021. We stopped in-office consultations with the March 2020 pandemic lock down. (I first heard of Zoom when my church started using it. We’re a small congregation and can see everybody on screen.) Since April 2020 I’ve Zoomed bankruptcy […]
The post We’re Zooming Virtual Bankruptcy Consultations by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
Dealing with debt is not an easy process. Seeking legal help is necessary when working on debt management. Filing for bankruptcy enables a debtor facing financial problems to wipe out debts without having to repay everyone in his or her creditor list. A declaration of bankruptcy helps individuals and businesses seeking debt relief. Consulting a trusted bankruptcy lawyer will be beneficial for you to understand the complexities of bankruptcy law. He or she can discuss how to file a bankruptcy petition and avoid mistakes as you go through the tedious bankruptcy process. Bankruptcy lawyers will also help you have a fresh start and rebuild your financial future through a successful bankruptcy filing.
There are certain types of bankruptcy that you may choose from depending on the types of debt you have. Filing Chapter 7 (liquidation bankruptcy) and Chapter 13 (reorganization bankruptcy) are the most common.
When filing Chapter 7, your bankruptcy trustee shall liquidate your nonexempt assets. A trustee in bankruptcy cases shall be the one to manage the sales of your personal property and distribute the funds to your creditors.
Meanwhile, if you decide to file for bankruptcy under Chapter 13, you are to negotiate for a repayment plan. Under this filing chapter, you may stop foreclosure and repossession as long as you can make the required monthly payments. Your bankruptcy petition trustee will also be the one to secure the funds to be given to your creditors.
Pros of Filing a Petition in Bankruptcy
- Automatic Stay
Bankruptcy filings begin when the relevant paperwork and supporting documents are filed to the bankruptcy court. Once it has been approved, an automatic stay shall take effect immediately. This shall stop wage garnishment, foreclosure, harassment, repossession, utility disconnection, and even possible lawsuit. An automatic stay prohibits any collection activities from lenders and debt collectors.
- Bankruptcy Discharge
The main goal of filing bankruptcy is to have your debts discharged. In Bankruptcy Chapter 13, after you pay off your debts and successfully finish your payment plan, you are no longer obliged to pay back your remaining debts, as this will be discharged.
- Securing Personal Property
Filing bankruptcy under Chapter 13 enables you to retain your house, vehicle, and other properties. While Chapter 7 will require you to liquidate your assets, there are exemptions. These will depend on the state law in place when you filed for bankruptcy. Bankruptcy attorneys can advise you on how to work around these exemptions.
Cons of a Bankruptcy Proceeding
- Credit Score
One of the issues that you have to deal with when you file a bankruptcy petition is a drop in your credit score. A Bankruptcy Chapter 7, for instance, will stay on your credit report for ten years. However, this drop in the credit score is worth the fresh start you will get.
- Child Support, Alimony, and Student Loan Debt
There are some obligations that bankruptcies cannot wipe out. These include certain tax debt, child support, alimony, and student loans. Your bankruptcy attorney can advise you on what would be the best course of action if most of your debts cannot be discharged even after filing bankruptcy.
Consult with a credible and experienced bankruptcy attorney to help you as you prepare bankruptcy forms and other paperwork for your bankruptcy case. Call us at the Northwest Debt Relief Law Firm for legal help and assistance.
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The post What are the Pros and Cons of Filing Bankruptcy? appeared first on Vancouver Bankruptcy Attorney | Northwest Debt Relief Law Firm.
When an individual files a Chapter 7 bankruptcy case, the debtor’s non-exempt assets become property of the estate that is used to pay creditors. “Property of the estate” is a defined term under the Bankruptcy Code, so a disputed question in many cases is: What assets are, in fact, available to creditors? Read More ›
Tags: Chapter 7, Eastern District of Michigan, Estate Planning
When an individual files a Chapter 7 bankruptcy case, the debtor’s non-exempt assets become property of the estate that is used to pay creditors. “Property of the estate” is a defined term under the Bankruptcy Code, so a disputed question in many cases is: What assets are, in fact, available to creditors? Read More ›
Tags: Chapter 7, Eastern District of Michigan, Estate Planning
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.