Tax Refund Bankruptcy and a Fresh Start Part 2

Now that you have made the decision to file for bankruptcy, and you are going to use your tax refund to

do so, there are a few important things you need to know.

You MUST consult with an attorney before you start spending your tax refund money. A portion of your

refund may not be exempt (i.e. safe from your creditors), and there are precautions that we need to

take to make sure you do not get in trouble with the bankruptcy Trustee. Any portion of your refund

that is Earned Income Credit and/or Additional Child Tax Credit is safe from attachment by your

creditors, but do you know how much of your refund is attributed to those two credits and how much is

a result of over withholding?

It is also very important that we pay close attention to when you receive your refund and when we file

your case. Is the money you received your actual refund or did you get the Emerald Loan from H&R

block? There is an important distinction as the Emerald Loan is not your refund, rather it is a loan that is

repaid with your tax refund and taking this approach can result in a delay of your bankruptcy filing.

We will also need to discuss what you can spend your tax refund on. A large percentage of my clients

typically use their tax refunds to pay back their family that has helped them throughout the year. If you

anticipate filing a bankruptcy, paying back your family can prove disastrous as the bankruptcy Trustee

may be able to force your family members to pay that money back to the bankruptcy court.

Tax refund time is the best time of the year to get your bankruptcy filed and to obtain financial freedom,

but make sure you take the time to meet with an experienced bankruptcy attorney to maximize your

options and to truly get a fresh start!