When I meet with new clients one of their biggest concerns is losing their tax refund. Many people are under the impression that if they file a Chapter 7 Bankruptcy before they receive their tax refund they might lose it for the year. Although this was true in the past, recent changes to the law may make it better for you to file Chapter 7 Bankruptcy BEFORE you receive your refund.
In Missouri, any amount of your refund that is attributable to the Earned Income Tax Credit or the Additional Child Care Tax Credit are completely exempt in a Chapter 7 Bankruptcy BEFORE you receive it. However, once you receive the refund, the money is able to be taken by the Chapter 7 Trustee. You can spend the money before you file your case, but the Trustee is going to request an itemization of how you spent the money. Did you plan on paying back a friend or family that helped you out through the previous year? You may not be able to do that and still file a Chapter 7 without the Trustee trying to get the money back from your friend or relative. Were you planning on saving the money for a rainy day? Once the money is in your account the Trustee could take it, so you may not be able to save as much as you planned.
If you’re thinking of filing a Chapter 7 Bankruptcy this year, it’s important that you talk with an attorney BEFORE you file your tax return. I offer a free consultation, in office or over the phone, and can help advise you on the best time to file. Call me today at 314-802-8328 to schedule your free consultation or Email Us.