With tax season upon us, many Americans are looking forward to getting big tax refunds. Many of us use these refunds to replace aging appliances, catch up on car payments or put into a vacation fund for when warmer weather finally comes back. However, many people are also worried about how to deal with debt that they racked up during the holiday season. In order to get relief from this debt, and with holiday ornaments finally put away, many consumers contemplate filing bankruptcy after the New Year begins. Filing bankruptcy gives consumers a fresh start in their financial life. However, there is a trade-off involved: while filing bankruptcy will wipe out most of your debt, you might have to give up or buy back property that is not “exempt.” Filing for bankruptcy could require you to pay for an asset (usually a car) for which you already paid.
The filing of a bankruptcy case creates an estate similar an estate that is created after someone dies. This estate is made up of one’s assets that are not exempt under the law. The United States government appoints a trustee in a Chapter 7 bankruptcy case to liquidate (or sell) any non-exempt assets and use the proceeds to pay unsecured creditors like credit cards. In order to be able to protect property and keep the trustee from taking from you when you file bankruptcy, the Debtor must claim the property is exempt under Florida or federal law. (Florida has “opted-out” of federal Bankruptcy exemptions, so Debtors may only use exemptions under Florida law or non-bankruptcy federal laws.)
The only part of tax refunds that is specifically exempt under Florida law is the part of the refund from the Earned Income Tax Credit. (Although Judge Jennemann in Orlando recently held that Child Tax Credit is exempt in Chapter 7 cases.) The rest of your tax refund falls under the personal property exemptions under Florida law, which are among the stingiest in the nation. There are no specific exemptions under Florida law to project the Child Tax Credit; the American Opportunity Tax Credit (which helps families pay for postsecondary exaction); the Lifetime Learning Credit (which helps people who go to college later in life or have to change jobs due to down-sizing or loss of jobs because of technology or free trade agreements); or the Child and Dependent Care Credit (which helps pay daycare costs for working parents). Many of these tax refunds are refundable and therefore give taxpayers a much larger refund than they otherwise would have received. If these refunds cannot be exempt under the law, you could lose them to the Chapter 7 trustee and not be able to spend them the way in which you intended.
Experienced and knowledgeable Jacksonville bankruptcy attorneys can guide you through the process so that you can maximize the amount of your tax refund you can keep in bankruptcy while also getting relief from credit card debt. Our lawyers can advise you on exactly when to file your bankruptcy case in order to protect your tax refund. Contact the Law Office of David M. Goldman, PLLC today for a free initial bankruptcy consultation. A Jacksonville Bankruptcy Lawyer can help you decide if filing bankruptcy is best for your future.