Your tax refund can vary based on when you file bankruptcy
When you decide to file bankruptcy will be important if you are expecting a tax refund of a significant amount. Tax refunds are most often viewed by law as being part of the bankruptcy estate. Calendar proration is used to determine how much of the tax refund that can be taken by the trustee in your state. Usually, if you file bankruptcy in the first few months of the year, trustees are not as interested in your tax refunds for that year. However, if you file bankruptcy at the beginning of the year, you likely haven’t received your tax refund yet. This means that your tax refund will likely not be protected.
This is why there is often a “sweet spot”, or an ideal time, to file bankruptcy. This occurs as early in the year as possible, but after the individual has already spent the previous year’s tax returns.
Sometimes your tax refund may not be your primary concern in filing bankruptcy. You may be more concerned with avoiding wage garnishment or foreclosure. However, if tax refunds are a concern of yours, please contact us and we’ll advise you on your options to keep the most from your tax returns.