The extended 2020 tax deadline happened, and many people are now expecting tax refunds to be deposited in their bank accounts. However, even if a refund can provide slight financial relief for some households, many people still have concerns about unpaid and past-due debts. If you’re considering filing for Chapter 7 bankruptcy, you should discuss how it impacts your tax refund with a tax and bankruptcy lawyer in San Francisco.
Can You Retain Your Refund?
No one wants to receive a tax refund only to lose it to the bankruptcy court. If you receive your refund based on income you earned prior to filing for bankruptcy, your refund could be seized by the bankruptcy trustee. If you received the refund based on income earned following a case filing, you can keep the refund.
Even if your refund is vulnerable, you can use the money for necessary expenses, such as:
- Housing and utilities
- Car payments
- Food and clothing
- Healthcare expenses
- Education costs
Spending the money on such items allows you to
use the funds for your own benefit. You cannot, however, spend the money on
luxury items or the repayment of debts of your own priority.
You can also use the refund to cover the filing fees and attorney’s fees for your bankruptcy case. This allows many people to afford a bankruptcy filing and ensures they can make use of their tax refund.
Contact an Experienced Tax and Bankruptcy Lawyer in San Francisco
At Diosdi, Ching & Liu, LLP, our legal team handles tax-related legal matters, as well as Chapter 7 bankruptcy, and we can advise you of the implications of a possible bankruptcy case. Please call 415.318.3990 or contact us online if you have tax concerns or want to learn about your options for debt relief.
Written By Anthony Diosdi
Anthony Diosdi focuses his practice on international inbound and outbound tax planning for high net worth individuals, multinational companies, and a number of Fortune 500 companies.
