In cases where you might be expecting a tax refund, that capital could easily end up being assets of the bankruptcy estate. Having said that, there are methods of preserve your reimbursement if you are anticipating one.
To begin, that amount of money which the federal government owes you with regards to your tax refund is often claimed as exempt property. Illinois has opted out of the national personal bankruptcy exemptions and makes use of as a substitute its own exemptions. The Illinois law permits a "wildcard" exemption of up to $4,000 total for any personal assets other than wages. So long as you lack any other personal property that you would likely prefer to claim as exempt, or perhaps in the instance that that property's worth is in fact below $4,000, your refund may very well be exempted according to the "wildcard" exemption.
Next, you may apply your refund toward next year's taxes. When you file your return, you may decide to apply tax overpayments towards tax liability for the next year. If you happen to make this choice, you may not change your mind - it is an irrevocable election. As you are unable to revoke the election to use your reimbursement for the next year's taxes, then you don't possess any kind of right to a refund. As you would no longer possess a right to a refund, there's no property interest to end up being part of the bankruptcy estate.
Additionally you can prevent your refund from becoming property of the bankruptcy estate just by waiting to file till once you collect your refund. Once you've gotten your tax refund, you most probably could devote this money on your attorney's fees or consumable necessities. These are proper purchases to spend your tax refund money on.
It is significant to note that tax credits may be kept from the bankruptcy estate for quite a few good reasons as well. One argument could be that the right to a tax credit can not be identified before the end of the tax year. In the event the right to a credit has not determined, there is no interest in the credit that can become the property of the bankruptcy estate. Assuming you have not filed your tax return yet, an argument might be made that there's no interest in the credit as well. Furthermore, the earned income tax credit may be entitled to exemption as a public assistance benefit.
Chicago bankruptcy attorney John Kunes is on a mission to be the bankruptcy lawyer Chicago can count on. Find answers to all of your questions about bankruptcy in Chicago at John's bankruptcy blog, ChicagolandBankruptcyHelp.com.
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