It’s tax season again! Most individuals usually plan what they’re going to do with their refund long before it hits their bank account. They plan to catch up on bills, put a down payment for a car, or take a much needed vacation with their family. However, did you know that the tax refund is an asset that is considered by the bankruptcy laws? This means that even if you have not received it yet, if you file for bankruptcy, the tax refund is subject to seizure by the bankruptcy court. If you cannot protect it with your bankruptcy protections allowed by law, it can be taken away by the bankruptcy trustee and the money can be used to pay back a portion of what you owe to your creditors.
Can you keep a part of your refund? Well, that depends. The main exception to the rule is money received for Earned Income Credit (“EIC”). In Florida, all Earned Income Credit Amounts are yours to keep. If you receive a tax refund of $5,000.00 and out of those amounts, $4,000.00 are listed under EIC (Line 62 in your Taxes), you’re allowed to protect and keep those amounts completely.
It is important to remember that each case is different. Your tax refund can vary based on your family size, dependent amounts, and income generated last year and this can ultimately affect what you receive and how much you can keep while filing for bankruptcy. The best way to make an informed decision and know the optimal time for filing is to meet with attorney Alberto H. Hernandez as soon as possible to discuss your options! As always, we are here to help you!