Thursday, December 30, 2010

Tax refunds in Illinois bankruptcy cases

As 2010 winds to a close, we hope you are enjoying your holiday season and we wish you the best for the New Year. Tax refund time will be approaching soon, so this post includes a few tips to help your bankruptcy case go smoothly in the new year. When it comes time to meet with the bankruptcy trustee after we file your case, they will ask you about your tax refund. Here are some general tax refund tips to help you most debtors avoid any problems when they file the case:

Pay the balance of attorney’s fees & court costs
Spend on necessities (rent, car note, food, utilities etc.) Pay with cash and debit cards.
Prepare and electronically file your taxes early
Tell your lawyer what you expect to get back & make a copy of the return before sending it in

Take rapid refunds
Pay family or friends
Buy luxury goods
Do not charge on your credit cards, even small amounts
Pay small debts or debts you want to discharge
Wait until April to file your taxes

We may be able to protect a portion of your refund from seizure by the bankruptcy trustee, but we will need to see your tax return and discuss it with you over the phone.

The Illinois exemption is $4000 for wildcard, which is used to protect your household goods, money in the bank as well as the refund, so there could be some timing issues here. Any earned income credit portion will automatically be protected in addition to the wildcard amount we may use for the rest.

We can help you keep your refund, but you must retain our services for us to review your case and assist you. As always, feel free to give us a call and we’d be happy to discuss it with you. We would rather advise you on how to keep your tax refund than see the bankruptcy trustee take it from you! Remember each case is different, so you should rely on your attorneys advice once they know all of the facts of your case. Good luck and happy new year.