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St Louis Bankruptcy Lawyer: How Do I Protect My Tax Refund When I File For Bankruptcy?

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I get this question a lot right around tax season (from January to April, and sometimes thereafter). The concern, of course, is that if you file a St Louis bankruptcy, you will end up losing the refund. But it does not have to turn out that way!! So long as things are handled correctly, you stand a very good chance of keeping your tax refund! Below is a fuller explanation:

When you file a bankruptcy, it is required that list out everything you own (so that court has a full picture of your assets). And when the court says everything, they mean everything!! This would include furniture, cars, bank accounts, clothes, potential lawsuits, and certainly tax refunds.

The reason why is pretty simple: the Bankruptcy Trustee (the individual who will review all the documents you file with the court) wants the list so that he/she can determine if you have any assets that can be liquidated.

Your St Louis bankruptcy attorney will get this list from you ahead of time. And good attorneys know how to make use of your state exemptions. “Exemptions” protect your assets by exempting any equity that exists in them. For instance, Missouri has an exemption for Household Goods (like cloths, pots and pans, furniture, etc.) of $3,000 (6K for a joint, married couple). If have $2,000 worth of household goods (garage sale value), then the state exemption for these items is more than enough to cover (or protect) the goods.

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But when it comes to a tax refund, there is no specific exemption that applies (other than the “Wildcard” exemption, but that is only $600 for an individual, or $1,200 for a joint couple). So if you have a refund that you’ve just received (or you are anticipating in the near future) in the neighborhood of $10,000, no exempt will keep it safe.

So what do you do in this kind of situation? A lot of folks will simply wait to file for bankruptcy until after they have spent most of the refund. Because once the refund is spent (on proper items), then there is obviously nothing for the Trustee to take (and nothing for your attorney to exempt)!!

The affordable St. Louis bankruptcy attorneys at Brinkman & Alter, LLC have been saving and protecting people’s assets for years. Our goal is to make sure that you keep the assets and property you want, discharge the debts that you want to get rid of, and do it all at an affordable cost to you. All phone conversations and office consultations are free of charge.

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