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Protect Your Tax Refund in Bankruptcy
If you are due a tax refund and file bankruptcy, you must take proactive steps to protect it. Asset protection is a big part of what bankruptcy lawyers do. If you want to protect your tax refund in bankruptcy, talk to an experienced bankruptcy lawyer.
An income tax refund received after a bankruptcy is filed is subject to turnover. Doan v. Hudgins, 672 F.2d 831, 833 (11th Cir. 1982). The trustee will seek to seize your tax refund and distribute the proceeds to your creditors. You must proactively protect your tax refund in bankruptcy.
Chapter 7 vs. Chapter 13
Tax refunds as assets in Chapter 7 are always subject to liquidation. But cases filed later in the year, or right before tax season, see more tax refund turnovers. Again, if you can exempt your tax refund, then the trustee will have no interest in liquidating it for distribution to creditors.
In Chapter 13, however, if you propose a 100 percent repayment plan, then your tax refunds are yours to keep. Chapter 13 percentage plan cases often result in tax refund turnover to the trustee. You will want to discuss with your attorney how best to adjust your withholdings to minimize the amount of tax overpayment you make each year.
How to protect your tax refund in bankruptcy
The exemption laws applicable to your jurisdiction determine how much of your tax refund you can protect. Virginia and Maryland bankruptcy filers must use the state exemptions. Washington, D.C. filers may use either the state or federal exemptions.
Many people rely on their tax refunds to tune up their cars, fix the roof, pay tuition, shore up emergency savings, or even to take a badly-needed vacation. If you want to protect your tax refund in bankruptcy, let your attorney advise you how best to do so.
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Brian Lee from Lee Legal was an amazing attorney to work with. He took his time, reviewed my documents and we discussed my situation thoroughly. He explained the process and my options as well as gave his recommendation. Not only did he assist, but he ensured that I knew this...
I was very nervous and scared about going through this process. But Brian was very knowledgeable and helped me through it. I was notified about any and all updates to my case and he was very responsive when I had questions regarding any concerns I had. Although a bit nerve...
Brian provided me with a very detailed analysis about my potential case after our first consultation. He promptly responded to all my complex questions, especially navigating student loans and some tax discussions. He is very professional and experienced at what he does, I would...
I've had the pleasure of working alongside Brian V. Lee for several years, and I can say without hesitation that he is one of the most knowledgeable bankruptcy attorneys in the DMV area. Brian's command of Chapter 7, 11, and 13 practice is exceptional, and his clients in the DC...
Brian has the amazing talent of taking complicated legal matters and distilling them down to seamless, frictionless resolutions. He is a phenomenal problem solver and a trusted advisor.
Brian is both warm and professional. He helped me navigate a financial issue that I had not been looking forward to working on and he made the entire experience non-stressful, receiving a lot of anxiety I had around the matter. He is straight forward and a fantastic problem...
I had the opportunity to work with Brian at a time when I was challenged by a professional setback and forced with the challenge of making some very difficult legal decisions. Additionally, I worked with him again as I was dealing with some financial issues pertaining to my...
Still several years from Public Service Student Loan Forgiveness and saddled with significant student loan payments in proportion to my income, I came to Lee Legal to explore the bankruptcy path. Through his counsel, Brian took the fear out of the process and helped me to...
