Bankruptcy – Should I Get My Tax Refund Before I File?

“When considering bankruptcy, should I wait until I receive my tax refund before I file?”

As a bankruptcy attorney, this is a frequent question I get in my Dalton, Rome, Cartersville and Dallas, Georgia offices every year from January until April.

The answer to this question is, “It depends.”  I understand that this answer can be frustrating for someone who is trying to make a decision and needs answers fast.  However, any person who is considering bankruptcy must understand that every case is fact specific.  The answer to this question depends on the facts of your case.

To help illustrate how some of the rules regarding tax refunds play out in bankruptcy cases, I will write about some examples.  However, anyone who wants real answers about their situation should meet with me so that we can analyze the specific facts of your case and make a decision that is best for you.

Lets say you are going to receive a $5,000.00 tax refund.  Assuming you have no other assets that require wildcard protection, we can use the Georgia exemption in bankruptcy to protect your entire refund.  A person in this situation could file right now without fear of losing their tax refund they expect to receive in a few weeks.  In this specific situation, there is no need to delay the filing.

If the facts are changed to a situation where you have $10,000.00 in equity in your home, there would be no wildcard exemption left for you to protect all of your refund in an individual case.  With these facts, it might be better to postpone the case filing and spend the tax refund.  When I say spend the tax refund, I mean good faith expenditures.  For example, spending your refund to repair a leaky roof is a good faith expenditure.  Repairing your car engine is another example of a good faith expenditure.  In contrast, taking a trip to Hawaii and then filing  is clearly bad faith.

Every case is different and there are exceptions to general rules.  Call me today at 706-295-0030 so that we can sit down together and review your situation.

Other Posts:

1.  How much of my tax refund do I get to keep after I file  bankruptcy?

2.  Can I do a rapid tax refund if I file Chapter 13 bankruptcy?

3.  Tax refunds in Chapter 13 cases.

4.  What is Chapter 13?

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