For many people who are in debt and behind on their payments, an income tax refund from the IRS can be a great boost to their economy and just what they need to get back on their feet. However, if you’re considering filing for Chapter 7 or Chapter 13 bankruptcy sometime in the near future, you may end up having to turn over some or all of your tax refund to the bankruptcy trustee in order to pay off your creditors.
The problem lies in the fact that there is no bankruptcy exemption that covers the majority of IRS tax refunds, meaning that even if you’ve overpaid your taxes during the year, you’re not likely to get that money back. What’s more, if you’ve already received and spent your tax refund prior to your bankruptcy filing, you may even be required to pay this money back.
The good news is that Florida does offer one exception to this rule, as any tax refunds granted through the Federal Earned Income Tax Credit program are always exempt and can never be taken by the trustee.
Even future expected refunds may be required to be turned over to the trustee, which means that even if you were to file in July of this year, you will most likely be required to turn over whatever tax refunds you’ve accrued from the start of the year up to the date you filed—in this case, 7 months worth. So, even though you won’t even file your taxes until April of the following year, you may still be required to forfeit a significant portion of your refund when you finally receive it.
As you can see, bankruptcy can be an incredibly complicated process, which is why you should always find a reliable bankruptcy attorney to help guide you through the process.
Experienced Bankruptcy Attorney
At The Law Office of Kelley & Fulton, P.L., our professional team has more than twenty-five years worth of experience working with all types of bankruptcy cases. So, if you’re struggling to pay your bills and don’t know where to turn, give us a call at (561) 693-0255 and let us help you begin the road to financial recovery.