The 2018 tax filing season officially begins on January 29, 2018 and the Internal Revenue Service (IRS) expects to receive approximately 155 million tax returns this year. Most individuals who are eligible to receive refunds via direct deposit can expect a turnaround time of 21 days with the first direct deposit date of the 2018 tax season expected to be February 12, 2018. For those who have recently filed bankruptcy or who are planning to file bankruptcy in the immediate future, your bankruptcy case could impact your tax filing process. Determining how bankruptcy will affect your tax refund is something that you should consider in order to avoid making any serious mistakes that can impact your bankruptcy proceedings.
Your Tax Refund is an Asset
Tax refunds are often one of the largest infusions of lump sum cash that a person or family receives during the year. During tax refund season, the entire economy benefits from the boost in sales and business that occurs when large amounts of money are in circulation. Before filing bankruptcy, your tax refund may seem like a way to get anything you want or need but cannot usually afford, but after you file, your tax refund is viewed as an asset. In the eyes of your trustee, your refund is more useful to your bankruptcy estate than real estate, vehicles, or other real property.
Bankruptcy Estate and Offsets
The trustee assigned to your Chapter 7 or Chapter 13 bankruptcy case represents your creditors and collects certain assets to repay your creditors. All of your available assets become part of your bankruptcy estate. In most cases people have few assets that can be seized or liquidated, but a tax refund is easily accessible cash that a trustee can use to at least partially repay your creditors. However, if you do not file for bankruptcy and obtain an automatic stay before filing your taxes, it is possible that certain creditors may offset any refund to which you were entitled. A person who is married and filing jointly with a spouse may be able to have part or all of their refund returned, but that process can take weeks or longer.
There are exemptions and exception to each rule including your tax refund being treated as an asset that must be turned over to your bankruptcy trustee. In certain situations, you may be able to keep part of a tax refund that is received after you file bankruptcy. There are different bankruptcy exemptions that are influenced by the amount of income earned, the type of credits received, and the type of bankruptcy that is filed.
Contact a Bankruptcy Attorney
If you are considering filing for bankruptcy relief but have questions about the possible tax implications, always talk to a bankruptcy attorney before filing an income tax return. A qualified attorney can offer you advice that is applicable to your unique situation. The team at Adam Law Group is here to answer any bankruptcy questions that you have and provide you with answers that pertain to your unique situation. Contact us today at 904-329-7249 to schedule an initial consultation at our conveniently located Jacksonville office.