Should You File for Bankruptcy Before or After Tax Season?
Are you just filing, or are thinking about starting your bankruptcy proceedings soon? You're also expecting to get a tax refund this year, correct? As tax season kicks off, you'll need to consider the timing of filing your taxes as well as filing for bankruptcy. Timing is what's going to determine whether you get to keep your tax refund or if it goes directly to your bankruptcy estate.
Why Timing And Hiring A Season Bankruptcy Attorney Should Be Your Only Option!
Handling of tax refunds can lead to drastically different results, depending on how you handle them. This is an area which is very fact specific, and is why you need to consult with an experienced bankruptcy attorney to do pre-bankruptcy planning, which could easily save you more than his fee.
Filing your own bankruptcy is like doing your own open heart surgery. It saves money, if it works.
-Attorney, Brent Welke
Generally, for tax years prior to your bankruptcy the unspent tax refund will go to your creditors, but a good bankruptcy attorney can avoid this forfeiture. If the tax year is the same year you file for bankruptcy, then the refund based on income you earned prior to filing for bankruptcy will go to the estate while you can keep the rest. For instance, if you filed for bankruptcy on April 1 and your only source of income is your job, you prorate your refund among the three months prior to filing for bankruptcy. Refunds applicable to any tax years after you file for bankruptcy will be all yours.
Even if you don't actually receive your tax refund until several months after you file your taxes, or if you have backlogged tax returns that need to be filed, you only owe the trustee the portion of your refund for tax years that you were in bankruptcy proceedings. If you anticipate that you will need to file for bankruptcy but you are anticipating a large tax refund then you may want to hold off on proceedings until the next tax year.
You can also take precautions by changing your tax withholding or estimated tax payments so you can only pay the bare minimum you expect to owe.
If You've Read This Article In It's Entirety Then You Know This Is Not An Easy Process! Let Us Do Our Job And Take A Bite Out Of A Banker!