In most cases many individuals that are going bankrupt rely on every penny that is coming into them. More often than not, there is more money going out than what is coming in, and this is what is leading them into a bankruptcy action to begin with.
In some cases individuals are waiting for their tax refund and this could be substantial depending on their financial situation. They often wonder whether they should put off filing for bankruptcy until after this has taken place. It is important to understand that the bankruptcy courts look at the tax refunds as assets just as they do anything else that the individual owns.
If you’re not able to use your tax refund as an exemption, this will become part of your bankruptcy action and will be considered by the bankruptcy trustee. In these cases, if possible, you may want to wait for a period of time after you have received your tax return and have utilized the money.
It may be that you have not even received your tax refund yet but are anticipating it and it is important to realize that under the Chapter 7 bankruptcy that this is something that it is perceived as an asset that you will receive, therefore it will become part of your assets in your Chapter 7 bankruptcy.
It can be extremely difficult to exempt your tax refund but it is all going to depend on which exemption list you are using (either the state or the federal list) and what state you live in. In general though, it is not very likely you will find an exemption that deals specifically with your tax refund. You may be able to use it as a wildcard exemption if this is allowable in your state. However there are not a lot of states that do offer the wildcard exemption opportunity.
To find out how and when you should go bankrupt, be sure to speak to a qualified bankruptcy attorney about your situation.