Whether a tax refund is protected in bankruptcy depends on whether the case is a Chapter 7 or a Chapter 13. This post covers how the refund is reviewed against Illinois exemptions in a Chapter 7, and how it is accounted for in a Chapter 13 budget.
Frequently Asked Questions
What happens to my tax refund if I file bankruptcy?
What happens to your tax refund when you file a bankruptcy? It depends on whether you’re in a Chapter 7 or a Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, Pratt & Maegli Law Firm looks at the tax refund that you are going to receive along with your exemptions.
One of the exemptions afforded by the state of Illinois is a wildcard exemption, which is either a $4,000 exemption for a single filer or an $8,000 exemption for a joint filer. The firm reviews the amount of the tax refund that you are expecting along with the exemptions to ensure that the tax refund will be protected.
If the tax refund is not going to be protected in a Chapter 7, then the firm looks at Chapter 13 to make sure that your tax refund is protected through the Chapter 13 bankruptcy.
When you are in a Chapter 13 bankruptcy, the way that you protect your tax refund is by building it into your budget. The firm looks at the amount of the tax refund that you typically receive to make sure that it is accounted for in your budget and that what you typically receive is protected.
Are you struggling financially? Pratt & Maegli Law Firm in Rockford helps Illinois families and individuals explore Chapter 7 and Chapter 13 options with clear answers and a personal approach. Call (815) 315-0683 or visit rockfordbankruptcytoday.com to schedule a confidential consultation and take the first step toward real financial relief.