Tax Refunds and Bankruptcy

TL;DR

If you need to file for bankruptcy, it is crucial to understand how your tax refund can impact the process.

Transcript

hey everybody John Skiba here from the Arizona Consumer Law Group and I'm the founder of the consumer warrior project in this video I wanted to talk about tax refunds and bankruptcy I'm recording this in April are actually recording it in February but we're heading up towards April and a lot of people are filing their taxes and getting refunds back... Read More

Key Insights

• 😒 Many individuals use their tax refunds to pay for the costs associated with filing for bankruptcy.
• 🚕 Timing is crucial when it comes to receiving and using your tax refund before filing for bankruptcy in Arizona.
• 🚕 Filing for bankruptcy after April may require you to turn over a portion of your tax refund the following year.
• 💼 Chapter 13 bankruptcy cases last longer than Chapter 7 cases and may require adjustments to withholdings to avoid tax refunds.
• 😒 It is recommended to use the IRS withholding calculator to determine the appropriate amount of taxes to be withheld from your paycheck.
• 🥶 Getting a large tax refund means you have likely overpaid in taxes throughout the year, giving an interest-free loan to the government.
• ✋ Using a tax refund as a savings account is not advisable, as it is more beneficial to receive higher paychecks throughout the year.

Questions & Answers

Q: How do people typically use their tax refunds when filing for bankruptcy?

Many individuals use their tax refunds to cover the costs associated with hiring a bankruptcy lawyer and paying court fees.

Q: What should you do if you're considering filing for bankruptcy and receiving a tax refund?

It is advisable to receive and use your tax refund before filing for bankruptcy. Consult with a bankruptcy lawyer to determine appropriate ways to spend the money.

Q: What happens if you file for bankruptcy after April?

If you file for bankruptcy after April, you may be required to turn over a portion of your tax refund the following year. The exact amount depends on the time of year you file.

Q: How are tax refunds handled in an active Chapter 13 bankruptcy case?

In Chapter 13 bankruptcy, you may need to adjust your withholdings to avoid getting a tax refund. If you do receive a refund, it may be included as a supplemental plan payment to your creditors.

Summary & Key Takeaways

• Many people use their tax refunds to pay for bankruptcy lawyer fees and court costs.

• Timing is important when it comes to receiving your tax refund and filing for bankruptcy in Arizona.

• Filing for bankruptcy after April may require you to turn over a portion of your tax refund the following year.