Can I Keep My Tax Refund If I File Bankruptcy?
Most likely Yes.
If you file bankruptcy and do not own a home, then it is very likely that you can keep your entire tax refund. The amount you expect to receive must be disclosed in your bankruptcy papers. However, it is very likely you can keep all of it.
On the other hand, if the debtor owns a home and files bankruptcy then the debtor may be required to turnover their tax refund to the bankruptcy trustee. If you own a home and want to know if your tax refund is protected, then it is best to consult with an experienced bankruptcy attorney.
Why Do I Have To List My Tax Refund On My Papers If I Have Not Received It Yet?
Anticipated tax refunds based on income earned in the prior year(s) are considered assets of the debtor. Bankruptcy law requires all assets of the debtor be disclosed on the bankruptcy papers.
However, in many cases if the debtor does not own a home, then the debtor can likely protect and keep all of his or her anticipated tax refund.
Can I Keep My Tax Refund If I Already Received It?
If you receive your refund prior to filing bankruptcy and you do not own a home, then it is likely you can keep all of it. You must still disclose where it went such as, if it is in your bank account, on a pre-paid card, or sitting at home in the form of cash.
As long as you fully disclose the assets you own or will be receiving, and have enough wildcard to protect your refund, then you should be able to keep it.
Is There A Limit To How Much Of A Tax Refund I Can Keep?
Yes.
The bankruptcy wildcard in California allows up to $28,225 to be protected. For most people, this is more than enough to protect a tax refund.
This wildcard amount is generally used by debtors who rent and who do not own a home with a lot of equity. That is because the wildcard is not available for those protecting their home equity in bankruptcy.
Conclusion
Non-homeowner debtors filing bankruptcy who have an anticipated tax refund, can likely keep their entire tax refund as long as they use the wildcard and do not exceed the wildcard limit. It is always best to consult with an experienced bankruptcy lawyer prior to filing bankruptcy. You can schedule a free consultation by clicking here.
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Published: January 30, 2020