Tax season is probably the favorite season for bankruptcy trustees because they tend to make the most money during this four month period. How do they make a lot of money ? – Well, your tax returns are ASSETS and in some cases the bankruptcy trustee is entitled to it.
When a person files for bankruptcy they must list all of their assets and their debts. They then must exempt (protect) certain assets from being taken away from them. A quick explanation of exemptions allowed in Florida are the following:
Keeping Home: In Florida if you are keeping your house then you can exempt $1,000 in goods and $1,000 in a vehicle;
Rent or Surrendering Home: If you don’t own a home or if you are surrendering your home then you can exempt $5,000 in goods and $1,000 in a vehicle.
Therefore if you are filing for bankruptcy prior to obtaining your refund then you must exempt the potential refund in order to protect it from being taken from the bankruptcy trustee. If you don’t know how much you are expecting to get then a good indicator is to look at the last two years and use that as a rough estimate. However you MUST exempt this potential return or it will likely be taken by the trustee.
Certain parts of your tax return may automatically be exempted from the trustee and thus not allowing the trustee to take 100% of the return. If you have children and your tax return includes and earned income credit (usually $800 or $1000 per child) then that portion is safe.
If you owe money on your taxes then you have no issue!
If you would like to speak to someone regarding the filing of a bankruptcy in South Florida please contact Shmucher Law, PL at 305.741.5553 or 954.309.5559. Shmucher Law, PL offers free consultations in our offices located in Boca Raton, Fort Lauderdale, Miami, Plantation, and Sunrise Florida.