“If you have already filed your tax return, and are expecting a tax refund, DO NOT SPEND IT. If you haven’t filed your tax return, file it timely, do not ask for an extension, provide me a copy of the return, and I will be intercepting the tax refund.”
Needless to say, a debtor that had plans to pay their homeowner’s insurance or their Miami-Dade County property taxes with the refund are disappointed and angry with their attorney (to put it mildly)! However, for a debtor who has chosen an experienced and conscientious bankruptcy attorney, the scene described above will never come to pass, at least not unexpectedly.
There many techniques that a knowledgable bankruptcy attorney can use to protect a debtor’s tax refund. A tax refund can be protected from a Chapter 7 Trustee through the use of exemptions or by timing of the filing of the bankruptcy after the tax refund has been received and spent on a permissible expenditure.
Florida exemptions availalbe to protect a tax refund directly include the tenancy by the entirety exemption, the Earned Income Credit (EIC) exemption, the $1,000 personal property exemption and the $4,000 additional personal property exemption. Also, a tax refund can be protected indirectly by timing the filing of Chapter 7 bankruptcy some time after the refund has been received, and using the Florida earnings exemptions to protect accumulating salary/wages while the refund is spent on permissible expenditures such as reasonable and necessary living expenses, or bankruptcy attorney fees and related court costs.
To be successful in protecting a tax refund from a Chapter 7 Trustee, other concepts have to be taken into consideration as well, including the Florida and federal statutes related to preferential transfers and fraudulent conveyances. An experienced consumer bankruptcy attorney will keep all of these matters in mind while developing a plan to assist you in protecting your tax refund and other assets from the reach of the Chapter 7 Trustee.
To learn more about exempt and non-exempt assets, follow this link to my law firm website:
To learn more about exemptions, see my previous blog post on the topic:
The hiring of a bankruptcy attorney is an important decision that should not be made solely upon advertisements. Before you decide, ask us to send you free, written information about Miami bankruptcy lawyer, James Schwitalla, P.A, and our firm. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.