With tax season coming to a close, you may be wondering what will happen if you are filing bankruptcy and have not yet received your tax refund or stimulus check(s). A tax refund is considered an asset in bankruptcy just like your vehicle, house, electronics, etc. This means that if you have not yet received your tax refund, and your tax refund does not fall within the allowable exemptions to protect the value of your assets, you may need to turn over your tax refund in order to pay your creditors. In Florida, the Earned Income Credit portion of your tax refund is exempt without having to utilize the other allowable exemptions so that portion is always protected. Stimulus checks in bankruptcy are a bit more complex. The most recent $1,400 stimulus check was not specifically exempted from creditor. This means that the trustee of the bankruptcy court could request turnover of the stimulus check, if it did not fall within the allowable exemptions, just like the tax refund. The stimulus checks are something unprecedented and there are continuing arguments in opposition of turnover, but the Middle District of Florida has yet to have any rulings by judges on this matter.
If you are going to receive a large refund and stimulus, and do not have enough exemptions available to protect it, there may be other options for you to utilize those funds prior to filing, for things like living expenses, necessary medical or dental work, or necessary vehicle repairs. If you are considering filing bankruptcy and/or have any questions regarding protecting your tax refund in bankruptcy, you should consult with an experienced bankruptcy attorney. Our experienced bankruptcy attorneys can assist you with these questions or concerns. Call our firm for a free bankruptcy consult today.