| At this time of year, it is always important to keep | | | | consult with a bankruptcy attorney. |
| your income tax refund in mind if you are planning on | | | | Finally, be wary of using your refund to pay back one |
| filing for Chapter 7 bankruptcy. If you want to keep | | | | of your creditors. For example, the law considers any |
| your refund rather than hand it over to the bankruptcy | | | | payment to a friend or relative exceeding $600 for the |
| trustee, follow these simple tips to keep your money. | | | | year prior to your filing for bankruptcy a preferred |
| First, be sure to consult with a bankruptcy attorney | | | | payment. If the bankruptcy trustee learns of such a |
| before you do anything. Bankruptcy laws can be | | | | payment, they can get the money back from your |
| complex and you do not want to inadvertently hand | | | | friend or family member. The bankruptcy trustee will |
| over your money to the bankruptcy trustee. Nor do | | | | also inspect the payments you made to a "regular" |
| you want to put your friends or family members in the | | | | creditor within 90 days of your filing for bankruptcy. If |
| bankruptcy trustee's cross hairs. | | | | you tried paying off a credit card with your tax refund |
| The best advice to handling tax refunds in Chapter 7 | | | | within 90 days of filing for bankruptcy, the trustee can |
| proceedings is to get your refund before you file. That | | | | take that money back and distribute it evenly to your |
| way, you have an opportunity to spend your money in | | | | other unsecured creditors. That would be bad on two |
| a way that will be exempt from the bankruptcy | | | | counts. First, you would have given money to a |
| trustee. You will want to consult with an attorney to | | | | creditor when you could have spent it on yourself. |
| make sure you spend your money on property that is | | | | Second, it can cause undue headaches with the |
| exempt. For purposes of bankruptcy law, exempt | | | | creditor who lost the money. It is a classic lose-lose |
| property simply means property that a bankruptcy | | | | scenario. |
| trustee cannot take and sell to creditors. Perhaps you | | | | As you can see, it is important to plan ahead when it |
| could spend your tax refund on rent, or get your car | | | | comes to your tax return. It is not terribly complicated, |
| repaired. Simply put, it is important you spend your | | | | but it can be a treacherous area for the unprepared. |
| money on things that the bankruptcy trustee cannot | | | | Be sure to consult with a bankruptcy attorney before |
| get to. However, what you can spend your tax refund | | | | spending your income tax refund. Otherwise, you risk |
| on varies from state to state, so it is important to | | | | losing it. |