For most people, tax season is a time to bring on all the headaches. It is a time where you have to dig up all those receipts that like to disappear throughout the year and hope that they are going to work well for your needs. For others though, this is a time when they could be getting a bit more money back from the government because they put too much in throughout the year. But if you filed for bankruptcy through the year, you may be surprised that your tax refund is taken out to deal with your debts.
The courts often rule in these cases that you are responsible for paying off as much of your debt as you can before the rest will be wiped out for you. This means if you file or receive the tax refund before you file for bankruptcy, you are going to have to pay all of this back to help pay down some of the debts that will be discharged during bankruptcy. If you need help understanding this whole process and how it is going to affect your tax return, make sure to contact the professionals at Paul Vanderbosch, CPA to help out. They have the experience to help deal with your bankruptcy issue and to ensure you are getting the best care possible. Contact them today.
Types
Most of the time, as an individual you will file either Chapter 7 or Chapter 13 bankruptcy. For Chapter 7, the court will take the money that you have and then ask you to sell off many of your possessions. This money will be used to pay off the creditors. Once you are out of assets and have paid off as much of the creditors as you can, the rest of the debt will be wiped out. For chapter 13, you will have to throw as much of your disposable income at the debts for three to five years and then the rest will be wiped out. Keep in mind that if you receive a tax refund during this time, it is considered disposable income and you will have to pay it in.
Effects
For chapter 7, if you get your tax refund and deposit it, you will find that the courts are able to take this along with the rest of your money in order to pay off the creditors. If you haven’t received the refund yet though, you may be able to keep this if the proceedings are all done before the refund comes in. For Chapter 13, all of your disposable income for several years will go towards this kind of debt, meaning that if you get a refund at all during those years, it is going right towards your debt.
Prevention
The professionals at Paul Vanderbosch CPA will be able to help you exempt some of your property from being sold off in chapter 7 bankruptcy. In Florida, you can keep about $1000 of personal property so you have a little bit to live from and in Kentucky you can deduct a maximum of $000 in furniture, jewelry, and clothing. Chapter 13 does not take any of your refund so you will be able to keep all your property, but you do need to hand in the refund each of the required years to ensure that you are going to pay back as much of the debts as possible.
Warnings
There are some specific rules that come into play when it comes to bankruptcy filing. While it is fine to pay off your creditors with your tax return with either of the two filing systems, you have to make sure to do it correctly. You need to spread out the payments among all of the debts. If you pay off one debt before the other, the court could decide that this is a preferential transfer and you could get in a lot of trouble. Consider working with the professionals at Paul Vanderbosch CPA to see what the best course of action is for all of your payment plans before making them to ensure you are taking care of your debts without getting into more trouble as you go along.
Bankruptcy is a hard time for everyone involved. There are a lot of rules that you have to follow and some of them could get you in a lot of trouble if you forget or put things in wrongly. Make sure that you have the right tax professionals on your side from the very beginning. The professionals at Paul Vanderbosch CPA will be able to work with you through every step of the bankruptcy filing to ensure you are getting fair treatment, that you get it all filed correctly, and that those debts are paid off as quickly as possible.
If you have just gone through the process of filing for bankruptcy, you probably feel overwhelmed. There are a lot of things that you have to keep in order for this and when tax return season comes, you may be in for a bigger surprise. When you need help figuring out your taxes, make sure to contact Paul Vanderbosch from Paul Vanderbosch CPA in Cincinnati, OH. Our professionals are here to help you through this process, ensuring that you are getting the very best care from the beginning. Contact us today to get started.
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