It is a busy time of the year for Halcomb Singler! Why? Because tax time is also a busy time for bankruptcy filings. There are a few reasons this is true. Most people likely guess (and would be right) that many people use their income tax refund to pay for their bankruptcy filing. However, the timing of the filing of a Chapter 7 or Chapter 13 bankruptcy can be important for more reasons than just figuring out how to pay.
If you live in Indianapolis, Zionsville, Noblesville, Carmel, Fishers or anywhere near Indianapolis the proper court to file your bankruptcy petition will be the Southern District of Indiana Bankruptcy Court. In this Court when you file for bankruptcy is very important as it relates to your income tax refund.
If you file a Chapter 7 bankruptcy prior to receiving your income tax refund for 2014 it is likely that the trustee will be able to take your entire income tax refund to pay your creditors. The only exception to this rule is that the trustee cannot take any of your income tax refund that is attributable to the earned income credit.l That’s right….just the earned income credit. That means your child tax credit and any other portion of your refund is up for grabs.
The great thing about using a bankruptcy attorney is that he or she has done this before. The attorney has the benefit of experience in court and knowledge of the procedures that you don’t have….any why should you? Your job is not to file bankruptcy petitions for people.
The bankruptcy attorney can advise you how to make sure that you receive your full income tax refund so that you can use it instead of your creditors getting to keep this money. I know that many of my clients wait all year for their income tax refund so that they can buy clothing for their children, make necessary large purchases such as a mattress or furniture, or to put down as a down payment on a car. The tax refund may also be used This tax refund is a big deal.
So, how do you make sure you keep your tax refund? You wait until you have filed your income tax return for 2013 and have received your refund prior to filing for bankruptcy. You also have to spend the majority of your income tax refund prior to filing your petition. Because I have done this a few times, I am fairly sure that your next question is……what in the world do I spend my income tax refund on when I am filing bankruptcy??
True, if you are in a position where it does not make sense to file bankruptcy, then paying creditors can be a great use of your income tax refund. However, if you are filing bankruptcy, paying creditors is probably not the best use of your income tax refund. However, each case is different. You may be a bit behind on a car you want to keep or your mortgage payment. Your child or yourself may need dental work. You may need glasses or contacts. You may need to have some work done on your car or buy some clothing because you haven’t done that in years. The possibilities are endless.
When tax time comes around I usually ask my clients to make me a list of how they would like to spend their income tax refund and e-mail it to me. I can then easily let them know whether it would or would not be a good idea to spend the income tax refund on something prior to bankruptcy. Since there are some things that you don’t want to use the money for prior to the filing of bankruptcy (paying back relatives, paying an old credit card debt, going on a vacation to name a few), I am always happy to assist my clients in a way to spend down this money so that it is not just throwing it away, but making their financial future more manegable.
If you have been attempting to pay off debt for years using your income tax refund and aren’t getting anywhere it may be time to seek professional advice. If you have more than $20,000.00 in credit card debt and are using cash advances to make your payments it is time to call. If you are behind on your debt payments and are receiving calls from creditors it is time to call. Halcomb Singler offers one free initial case evaluation where an attorney will sit down with you to discuss your financial picture, answer your questions and let you know whether or not bankruptcy might be beneficial to you. To schedule your appointment call our office at (317) 575-8222 or click here. We look forward to helping you put debt behind you in 2014.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.