If you’re expecting a tax refund and have filed or are considering bankruptcy, you might wonder whether you can protect your money. With wise planning, you can keep more of your assets. The questions below are some of the most common that people in such situations ask their lawyers. 

FAQ About Bankruptcy & Tax Refund Treatment

Can the bankruptcy trustee take my refund if I file?

Generally, yes. Tax refunds are part of the debtor’s bankruptcy estate, which means trustees have the right to claim them for creditors if you file bankruptcy before obtaining your refund.

Are there any exceptions to trustees taking refunds?

Exceptions exist, such as for refunds due to the Additional Child Tax Credit and the Earned Income Credit. Other exemptions may apply in certain situations. If your refund is small, the trustee might not claim it, but you must report it.

How can I keep my refund?

If you have not filed a bankruptcy petition yet, file your tax return and spend your refund first. You can spend it on items, including rent or mortgage, medical or educational expenses, food, utilities, and car payments. Another option is using your refund to pay the attorney fees before you file bankruptcy. 

Is there another way to protect my refund?

Yes, adjusting your exemptions so you have more take-home pay before filing bankruptcy can avoid a big refund that the trustee can claim. Another option is to increase your IRA or 401(k) contributions before filing your petition.

Wise planning with a bankruptcy lawyer can help you protect more of your assets. Residents throughout West Virginia’s Eastern Panhandle turn to the legal team at Kratovil Law Offices, PLLC for help in making important business and personal bankruptcy decisions. With more than 40 years of experience in bankruptcy and business law, these dedicated attorneys will guide you out of your murky financial situation. Call (304) 728-7718 to schedule a free consultation or visit their website to learn more about the services they offer.