Give Your Attorney Your Return As Soon As Filed To Plan The Right Step
If you are planning to file bankruptcy during tax time I will always instruct you to give me a copy of the return and to not spend the tax refund until we have had a chance to do some planning. What I say is not often what you hear. Anyone who has his pay over-withheld always has their own plans for the money. Getting a tax refund does not always meant that it will be taken by your bankruptcy trustee.
A Part of the Tax Refund Might be Exempt
Often all or a big chunk of it will be safe from your creditors as exempt. Ohio exempts the full amount attributed to earned income credit including the additional child credit. If you do not qualify for these credits you can still otherwise exempt up to $1,575 if you are single or $3,150 if you are married.
Before You File Bankruptcy
If you haven’t filed bankruptcy yet, you can get a car, repair your car or buy household goods. You can even use the money to pay for your bankruptcy case. You can’t prepay bills. You shouldn’t use the money to pay bills that will be properly discharged in your bankruptcy. That is simply a waste of money you could legally waste on something you might need or enjoy.
Don’t Try To Hide The Refund Money
If you panic and put your exempt tax refund in someone else’s bank account to hide it from your creditors you could lose the whole amount that you could have safely kept in your own bank account. Assets you fraudulently convey in Ohio can lose any exemption they might have had if in your own name. Plus you expose the other person to liability on your debt. Talk with your Westlake bankruptcy lawyer before you try to do something like this on your own.
Do Not Pay Loans To Family Members…Yet.
Same goes for paying off debts to family members while you still owe other creditors. This is both a preference payment and a fraudulent conveyance. Possession is not 90% of the law in this instance. Do them a favor: pay them the day after you file bankruptcy with properly exempted funds.
Sometimes the trustee will want some of your tax refund money. All he or she is going to do with it is pay your creditors. If they do it you will be debt free in the end. The most common thing people do with their tax refund anyway is pay bills. Isn’t it better to have someone do it who can wipe the slate free when all is done?