How will Chapter 7 bankruptcy affect my tax refund?
Chapter 7 trustees will look for tax returns if you file for bankruptcy around tax season. This does not imply you will lose your tax refund.
If you want to keep your tax refund while filing for Chapter 7 bankruptcy, you’ll need to do one of the following:
- spend the cash before filing a Chapter 7 petition, or
- employ a bankruptcy exemption to protect a tax refund you’ll receive after filing Chapter 7.
To properly file your bankruptcy case, you should consult a Charleston, WV bankruptcy attorney.
Continue reading to learn about specific techniques for keeping your tax refund while filing for Chapter 7 bankruptcy. Find out what happens to tax returns if you file for Chapter 13 bankruptcy.
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Is Chapter 7 Tax Refund Eligible?
The Chapter 7 trustee will inquire if you owe a tax refund but haven’t received it. You can file for bankruptcy if your taxes have already been refunded and if you have any other debt. Unless you obtain a bankruptcy exemption, you will lose everything.
Whether you have filed yet or are waiting for your refund, your answer will be “Yes.”. You’ll also need to use a bankruptcy exemption to shield any money you owe but haven’t yet received.
You are entitled to any refunds earned after filing for bankruptcy.
Retaining a Tax Refund when Filing for Chapter 7 Bankruptcy
There’s a significant possibility you’ll lose your tax refund if you fail to keep it safe. However, it is not required to occur. In a Chapter 7 bankruptcy, you can use these three tactics to secure your tax refund:
Adjust your tax withholding to avoid receiving a refund.
When you have more time before filing for Chapter 7 bankruptcy, lowering your exemptions and paying only the taxes you owe is a wise wikireports.me strategy. With each payday, you’ll get more money.
Spend your tax refund on necessities to keep your money safe.
A trustee may try to prevent your discharge if you buy expensive goods in bad faith. A trustee may conclude you paid one creditor while newsbiztime.com ignoring the others. Money received by the estate can be returned to the estate by the trustee.
To secure your tax refund, file a bankruptcy petition.
As part of the bankruptcy estate, your assets become the responsibility of a trustee, who manages the bankruptcy. The assets may be used to pay creditors by the trustee. The property your state determines you’ll need for work and living may be “exempted” or retained by you.
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