Indiana Lawyer For Bankruptcy Answers Reader’s Question About Tax Refunds

March 13, 2012 1:25 pm Published by

This is my week for answering questions posed by Bankruptcy in Indiana readers.  With tax season approaching, many visitors to the Zuckerberg bankruptcy law offices are getting protective about the tax refund dollars they’re expecting. “If I file personal bankruptcy in Indiana” this week’s reader asks, “Will my refund dollars be seized by the bankruptcy court?”

Before I can answer that question, I would need to ask this reader a question of my own: Which of these three describes your situation?

a) You’ve already gotten your refund and you still have the money.
When you file individual bankruptcy in Indiana, the tax refund money must be reported as part of your assets on the bankruptcy paperwork I help you file with the court.  It will be up to the court to decide whether you get to keep it to pay living expenses or not.

b) You’ve gotten your refund and already spent the money or will have spent it before you file.
The bankruptcy court will need to know how you spent that money – did you use it for essentials or on luxuries? If it was luxury, the court will not look favorably on your petition, saying you should have used the money to pay your debts.

c) You’re expecting a tax refund, but will not have received it by the time you file Indiana bankruptcy.
The bankruptcy court will need to know you’re expecting the money and will decide if you can keep it for essentials or insist you use it towards your debts.

Looking at your situation from a different vantage point, I want to share with you that, after 25 years as a debt consolidation lawyer offering bankruptcy services in Indiana, I’m used to seeing clients wait for their tax refund in order to be able to pay the legal fees for filing personal bankruptcy in Indiana. Without that money, they couldn’t afford to file!

Even if that describes your situation, I’d still urge you not to wait, but to go ahead and have an exploratory meeting with an experienced bankruptcy attorney to get a plan of action in place.

As my Columbus bankruptcy lawyer colleagues are fond of saying, taxes and bankruptcy are definitely related, but it’s a complicated relationship.  Things will work a whole lot better if you have a plan!


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This post was written by Mark Zuckerberg

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