As one of the Florida Gulf Coast region's leading bankruptcy law firms, we are often asked whether filing for bankruptcy means the losing a large federal tax refund. Like so many other issues about bankruptcy, the answer is often, "It depends."
If You Are Filing Chapter 7
If you qualify for filing Chapter 7 to eliminate your debts, any tax refund you have coming to you will be included in your assets and will be administered by the Bankruptcy Court. You may be able to use your personal property exemptions to protect as much of it as possible. Based on the size of the refund you may lose a portion that is considered the property of the bankruptcy estate.
If you are expecting a refund, it is often to your advantage to hold off on filing your bankruptcy petition until you have received the money. You can use the refund for legitimate purposes.
If You Are Filing Chapter 13
People filing Chapter 13 debt reorganization should expect to include their tax refund as part of their assets listed on their schedule of income, assets and debts. When you are repaying the debt, under an approved, supervised plan, you may be required to turn over the tax refund every year. Some Bankruptcy Court trustees require the forfeiture of the refund; others do not. To protect yourself, it is often the best strategy to readjust your tax withholdings from your paycheck in order to increase your monthly take-home amount, but receive a small refund to be turned over to the bankruptcy trustee.
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Learn more about bankruptcy and your income tax refund. Call an experienced Florida bankruptcy attorney at The Golden Law Group. We are ready to answer all of your questions about bankruptcy, debt relief and illegal collections practices.
From three convenient office locations, we represent individuals, families and business owners in bankruptcy matters in Bradenton, Brandon, Sarasota, Tampa and communities throughout the Florida Gulf Coast region. If you are over your head in debt and don't know where to turn for relief, turn to us. Contact us today for a free, no-obligation consultation with an experienced debt relief lawyer.