
If you receive a tax refund during your bankruptcy, the bankruptcy court will seize it and distribute it amongst your creditors. So if you are expecting a tax refund, it's best to file bankruptcy after you have received it and spent it on regular expenses.
The timeframe for scrutinizing your tax refunds lasts well after your bankruptcy is discharged, until you receive your next refund. The bankruptcy court will likely seize that refund too, so many of my clients choose to have the least amount possible withheld from their paychecks after filing bankruptcy to avoid that scenario.
The most important thing to be aware of about tax refunds in bankruptcy is that you could get into real trouble in this area if you are not careful. A couple of weeks ago when I was in a 341 Meeting of the Creditors with a client, we observed another bankruptcy proceeding go sour. The woman filing bankruptcy told the trustee that she had received a $5000 tax refund a few days earlier, which her daughter took out of her checking account. The trustee announced that she was going to hire an attorney and sue her daughter to get the money. The lesson is to always be upfront about your activity and consult an attorney about bankruptcy so you don't make mistakes like that.
The good news is you can safely spend your tax refund on a bankruptcy proceeding. More than 200,000 households around the country will do that this year.
The Alexander Bankruptcy Law Firm provides low low cost Chapter 7 and 13 personal bankruptcies. $995 Chapter 7 or $2500 Chapter 13 bankruptcies plus court filing fee. Free consultation with a compassionate attorney who will handle your case personally. Call 24/7, available to meet with you around your schedule. 602-910-6812. Conveniently located in Central Phoenix along the Camelback corridor. AlexanderBankruptcyLawFirm.com
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