Tax Return and BK

[PenutButterChip]

What is the name of your state? MA

If I get my tax return in about the next month and then file BK, will they ask for the money I have gotten? Or should I file BK now and do my taxes on April 15th?

 

[racer72]

It depends on the kind of debt your have. You will have to talk to a local bankruptcy attorney to determine which way to go.

 

[azgrandpa]

Tax returns seem to be a bankruptcy trustee's favorite target in a bankruptcy. Yes, they will try to get the return. If you spend it for essentials, such as house payment, property taxes, utilities, food, etc.; you MAY get to keep it. You should wait at least 6 months after receiving the refund to file. Even then, it's not a guarantee that the trustee won't ask for it!

An alternate thought on this might be to apply your return to next years taxes. That way, you can lower your withholding this year (2005), and get it back slowly though out the year. I'm not an accountant, so confirm that with a tax expert.

 

[Who's Liable?]

Most states require that you report the tax return to the trustee and only he can give the nod or not...

 

[acemagoo61]

Also Depends on Total Assets

What is the name of your state? MA

If I get my tax return in about the next month and then file BK, will they ask for the money I have gotten? Or should I file BK now and do my taxes on April 15th?

www.bankruptcyaction.com/bankruptcyexemptions.htm lists exemptions (I have found that some states are out of date, but the changes I have come across is to the filers benefit), you have the choice to file using Federal or State exemptions. MA has a 300k homestead exemption.

Federal allows only $18,450 in equity for a home, but also has a $925 wild card you can use on anything; also if you don't have $18,450 in equity in your home up to $9,250 of the homestead exemption can be used as a wild card. I have been unable to find anything like a wild card under MA rules, that doesn't mean there isn't one, you would have to check with a lawyer.

But say you only have $15,000 in equity in your home and a tax return of $4,375. $18,450 - $15,000 = $3,450. $3,450 + $925 = $4,375. In this scenario you would get to keep your tax return.

A lawyer may know of other exemptions I am not aware of.

If you have little ot no equity in a home, using the federal exemptions, you could protect your tax return. Also I believe when they calculate the equity in your home they would take the value they would get from selling your home and subtract the real estate fees. I believe if they sell the home they have to give you all the equity received up to the exemption amount from the sale of the home. This means that if they really can't net more than the exemption on your home, they are not going to do that.


Of course you don't want to put your home in jeopardy. But if the equity is low, your tax return can be protected under the wild card. Also you need to consider how much equity you have in a vehicle or other large asset, equity in a vehicle is how much you would get for the vehicle wholesale, not how much you would pay a dealer for the vehicle.

Definitely check with a lawyer if a house is involved.

 

[PenutButterChip]

Hey Good Info Ace.

We have NOOOOO Assets. Dont own the home. So I guess it would be best to take the Federal exemptions and use the wildcard to keep the tax returns. I will inquire about this to a lawyer.

 

[acemagoo61]

Sick

Hey Good Info Ace.

We have NOOOOO Assets. Dont own the home. So I guess it would be best to take the Federal exemptions and use the wildcard to keep the tax returns. I will inquire about this to a lawyer.

Some of these bankruptcy laws seem unfair. In theory you can own a $300k home in MA outright and not loose the home or a dime. On the other hand, you could be basically homeless but have $3,000 in equity in a vehicle your sleeping in and loose the vehicle. If instead of taking out a home equity loan to take advantage of the tax write off, I had instead made minimal payments on unsecured loan balances, I could have paid off the 40k left on the first mortgage, of owned my house outright, and I could have kept that home after bankruptcy. Of course I had no way of knowing that a year later I would end up out of work for as long as I have been.

Think about it, you keep a $300k home, after a certain waiting period after the bankruptcy you could sell the home, buy a $200k home and have $100k left over to buy a couple of cars, boat, whatever you want. Seems like there should be more of a wild card for people who don’t have real estate in a bankruptcy.