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Can I keep my tax refunds if I file for Bankruptcy?

DETROIT BANKRUPTCY ATTORNEYS

Your Tax refunds are assets just like cash and other property you own. There are several different ways to handle tax refunds depending on the type of bankruptcy you file.

Chapter 7: In order to keep your tax refund in a chapter 7 bankruptcy you must be able to exempt it. In many cases tax refunds, both state and federal, can be exempt. That means you can keep your refunds. However it is not always the case, especially if you are anticipating a large tax refund. There may be situations in which you should wait to file your bankruptcy until after you have received your refund and had an opportunity to spend some or all of the refund. You should review your specific situation with a bankruptcy attorney to determine the best way to protect your refund.

Chapter 13: Whether or not you can keep your tax refund in a chapter 13 bankruptcy depends on the way your bankruptcy payment plan is structured. In general, bankruptcy law in the Eastern District of Michigan requires you to turn over federal tax refunds to help fund your bankruptcy plan. However this can avoided if you (1) have a payment plan that purposes to pay 100% to your creditors; or (2) you pro-rate your tax refunds over the year and use them to supplement to monthly

If your Chapter 13 plan requires to you provide federal tax refunds, you still have options. The Bankruptcy does allow you to keep your refunds to help fund unexpected expenses that come up while you are in bankruptcy. This requires you to motion the court and ask for permission to keep a refund to use for a specific purpose. Your Metro Detroit bankruptcy attorney can help you accomplish this.

Schedule a Free Consultation with a Detroit Bankruptcy Attorney

Every situation is different and there are multiple ways to protect your tax refund. You should consult with a bankruptcy attorney at John A. Steinberger & Associates, PC to make sure you understand your options.

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