Tax time is coming soon. Employers are required to get W2s to their employees by January 31st so that they can file their federal income taxes. According to the website Bankrate, 30% of those getting tax returns plan to use it to “pay down debt”. Some of those tax returns will be used to fund bankruptcies.
One of the biggest benefits to filing bankruptcy just after receiving your tax return is that you have the opportunity to spend your return on reasonable and necessary things instead of turning it over to the bankruptcy trustee. You see, if a debtor was to file bankruptcy in July, they would have already earned 1/2 of their tax return for that year. The trustee would then ask for half of their tax return once it was received. As long as the debtor spends the return on reasonable and necessary things and then files bankruptcy, the money is both well spent and protected.
While I’d still argue that it’s Better to File Your Bankruptcy Before the Holidays, attorney’s fees do count as reasonably necessary expenditures which are allowed just before a bankruptcy. Many debtors have difficulty coming up with money to pay an attorney to file their case. A tax return gives them the opportunity to come up with that money in one lump sum. A New Year and hopefully a new financial life with a bankruptcy discharge.
It is important that money spent leading up to bankruptcy not be spent on “luxuries”. If you have questions about what constitutes a luxury and would like to plan out your bankruptcy before obtaining your tax return contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.