How to Protect Your Tax Refund in Arizona Bankruptcy
Nobody looks forward to filing bankruptcy. Most would say there is never a good time to need to file bankruptcy. Some times are better than others. A better time to file the bankruptcy is after you receive the refund.
Tax Refunds are not safe in Arizona Bankruptcy
A tax refund owed to you is not protected when you file bankruptcy. The bankruptcy trustee will require that you give him the check. You run the risk of losing the benefit of filing the bankruptcy if you do not cooperate in giving up the refund check.
There is an easy way around this.
The key element is whether or not the IRS owes you the refund when you file the bankruptcy. If you have not received it yet, it is owed. The trustee then has a right to take it from you once you receive it.
So long as it is practical for you to delay filing your bankruptcy until after you have received the tax refund, it won’t be owed to you when you file your case. The trustee cannot require that you hand over that money.
The reason the trustee can take the money if it is still owed to you is because it is not one of the things that the law allows you to protect. When Congress wrote the bankruptcy code it allowed each state to create a list of things that cannot be taken by bankruptcy trustees or creditors. These laws are called exemptions. The items on the list are “exempt” from being taken by a creditor or bankruptcy trustee.
Arizona’s list of exemptions does not allow you to protect your tax refund.
Easy to protect tax refund money
The easy way to deal with this is to spend the refund before you file your bankruptcy. It is okay to spend it on almost anything. It would be smart to spend it on services that you need or things that are also protected when you file your bankruptcy. For example, using the refund for needed medical or dental care, car repairs, home maintenance are all fine. Many people use tax refunds to pay for the bankruptcy.
What can cause problems is using the money to pay debts. The money used to pay a debt before filing bankruptcy can be collected from the person you paid it to by the bankruptcy trustee. One of the worse things a tax refund could be used for is to repay a family member. If you are not able to settle the matter, the trustee has a right to sue your family member to get the money back.
Phoenix Bankruptcy Attorney can help
There is no need to turn a good thing – a large tax refund—into a serious problem. There are legal and ethical ways to protect the benefits of the refund and put an end to the overwhelming debt that is causing the stress in your life. Bankruptcy law is about more than eliminating debt. Protecting what you have and what is owed to you is an important part, too.
Original article: How to Protect Your Tax Refund in Arizona Bankruptcy©2013 Arizona Bankruptcy Lawyer. All Rights Reserved.The post How to Protect Your Tax Refund in Arizona Bankruptcy appeared first on Arizona Bankruptcy Lawyer.