Taxes And Chapter 7

: Chris Lee Law Firm

  Filed under: Taxes

tax refund checkThe Chapter 7 bankruptcy process uses your income to determine your eligibility to file, as well as how much of your nonexempt property may be liquidated to satisfy debts. This poses a unique problem when tax time rolls around. Filing for bankruptcy around the time of owing taxes or receiving tax refund checks can influence the status of your financial situation.

Estate Matters

Any income that is received within 90-180 days of filing for bankruptcy can be factored into your filing. Whether you obtain a higher paying job, receive inheritance money or a tax refund, these funds are likely to be accounted for when filing. All income and assets become a matter of the estate, which is used to determine your overall financial position. If the court determines you have sufficient income or assets to satisfy some debts to creditors, these funds may be at risk of liquidation in Chapter 7.

There are some exceptions to this rule. For instance, if you have already filed for bankruptcy prior to filing your taxes you may be able to keep your tax refund through a wildcard exemption.  Federal bankruptcy exemption laws allow debtors to use the wildcard exemption to keep personal property or miscellaneous funds, which could include a tax refund of up to $1,150.

 


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