How To Use Your Tax Refund When Filing For Bankruptcy
Most people eagerly await their tax refund. Maybe they have extra expenses to cover, want to buy something outside their normal budget, or like to have some extra funds in the bank. In other cases, a tax return is a necessary part of an annual budget or needs to go directly into debt repayment.
If you’re planning to use your tax return to pay off debt, filing for bankruptcy might be a better option. If you plan to file bankruptcy this year, it’s important to be aware that how you spend your tax return can affect your bankruptcy proceedings, leading to a waiting period or postponement. Alternatively, filing without spending your tax return can lead to losing those funds. Always consult with a Gilbert bankruptcy lawyer about when and how to spend your tax return if you are considering filing for bankruptcy.
Should I Use My Tax Return to Pay Off Debts?
If you have a small amount of recent debt, such as a credit card, using your tax return to pay off the account in one large payment can save you money in the long run. You’ll avoid paying high interest rates for months to come, and enjoy safety from the possibility of not being able to make your monthly payments if something happens in the future. Although it might be more fun to spend your tax return on something else, it’s wise to use your tax return for smaller amounts of current debts if that will help you get your finances back in order.
Should I Use My Tax Return for Old Debts?
If you have had a debt for a long period of time, do some research before using your tax return to pay off the balance. Arizona recognizes statutes of limitations that may prevent a creditor from pursuing you in order to pay off the balance of a long-term debt. In some cases, filing for bankruptcy is a better way to deal with the debt. Consult with a bankruptcy law office in Gilbert to determine whether your tax return should be paid toward an old balance, or if filing for bankruptcy might be better option.
What’s the Best Way to Use my Tax Return Before I File For Bankruptcy?
If you and your attorney have determined that filing bankruptcy is your best option, you’ll need to carefully consider exactly how to spend your tax return money. In Arizona, your tax return isn’t protected in the bankruptcy process, which means the trustee can take a percentage of it to pay for your debts if you file Gilbert Chapter 7 bankruptcy.
Additionally, Arizona has bank account exemptions and will limit how much money you can retain in your accounts when you file Chapter 7 bankruptcy. In most cases, this means it will be most strategic to carefully spend your tax return before your file for bankruptcy so that you don’t lose the money. Some of the best ways to do this include:
· Medical or dental care
· Repair or maintenance on your primary vehicle
· Stocking up on household essentials that will store for a long time, such as toilet paper and other dry goods
· Reasonably priced furniture
· School clothes and supplies for your child
· Reasonable clothing, especially work apparel
· Bankruptcy attorney fees and court costs
It’s crucial to make sure your spending is reasonable. Your trustee probably won’t object to replacing old furniture, but luxury spending, expensive handbags, jewelry, and vacations are a bad idea. If you make these types of purchases on a credit card, they may not be discharged in the bankruptcy process or your petition may be denied.
It’s also not a good idea to use your tax return to repay personal loans from parents, friends, or family before filing for bankruptcy. Although this may seem like a good idea, it’s known as a preferential payment and is prohibited. Your bankruptcy trustee will require those funds to be returned and evenly distributed among your creditors. If you have any doubts about how to spend your money before bankruptcy, talk with your Gilbert bankruptcy attorney.
Invest in Yourself with Your Tax Return
If you will be filing for bankruptcy, you may be on the verge of other significant life changes. Your tax return could provide vital funds for those changes. For example, maybe you need to prepare some assets for sale, want to begin an educational program that will further your career, or need equipment for your own business. Your tax return can be a valuable tool for investing in yourself in a way that is protected in bankruptcy and enables you to build a fresh start.
Make the Most of Your Bankruptcy Filing with Expert Legal Advice
Filing for bankruptcy in Arizona can be overwhelming. It’s important that your petition is detailed, accurate, thorough, and timed carefully. Accidental mistakes can delay your petition, result in loss of valuable assets, and cost you thousands of dollars. In extreme situations, your case could be dismissed or you could even be charged with bankruptcy fraud.
That’s why working with the experienced legal team at Gilbert Bankruptcy Lawyers can help you make the most of your bankruptcy filing. We have collective decades of experience in assisting clients through each step of bankruptcy proceedings. Our attorneys will work to protect your rights, guide you through your options, and represent you from start to finish. Contact us today for a professional and confidential case review that can help you begin a fresh start free from debt!
Gilbert Bankruptcy Lawyers
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