Bankruptcy and Tax Refund Exemptions: How to Protect Your Money
Benjamin Franklin is attributed with the saying that nothing is certain except death and taxes. And while little can be done about the certainty of death, I can help you maximize the money that stays in your pocket by utilizing your tax refund exemptions when you file for bankruptcy.
On the date you file for bankruptcy, all of the assets that you own become part of your “bankruptcy estate”; this includes your tax refund. Debtors are able to exempt (or protect) assets that they own up to a statutory amount. If the debtor is owed a large tax refund, this refund is something a trustee will usually try to recover for the benefit of the unsecured creditors. However, with a little planning, I can help you keep most, if not all, of this money by properly applying your tax refund exemptions.
In Ohio tax refunds that contain credits attributed to the Earned Income Credit or the Additional Child Tax Credit are the debtors to keep. You can also apply your cash exemption ($450.00 in Ohio) and/or your wildcard exemption ($1,225.00 in Ohio) towards your tax refund. Any other portion of the tax refund is subject to being turned over to the trustee. Your tax refund exemptions can even be applied to a refund you have NOT received at the time of filing your bankruptcy case.
Use Your Tax Refund Wisely
It is important to know what property is exempt and what property you are at risk of losing when filing your bankruptcy case. Tax refunds can give a debtor some extra cash in their pockets when rebuilding their lives. Utilizing the tax refund exemptions is imperative to help you move forward with a life without debt!