Kentucky Bankruptcy Law

Counsel with Care

Tax day, April 15th, is almost upon us!

The new year also ushers in tax season. Instead of sugar plums we have receipts of deductions dancing in our heads. This season creates some additional concerns pertaining to bankruptcy. If you are trying to file a Chapter 7 and you just squeak in under the means test, pay special attention to your deductions. If you have claimed too few tax deductions on your W-4, then the trustee might object that it is an abuse for you to get Chapter 7 protection (overcome the presumption from the means test). Another related issue is the size of your tax refund. If you have claimed too few deductions then you will likely have a refund coming to you.

Even if you pass the means test regardless of under-deducting, you still need to be mindful of your refund. If you receive your refund prior to filing your petition, it would be wise to spend in on household necessities like groceries or repairs that are long past due, but which will not substantially increase the value of your home or automobile. If you will not receive the refund until after filing, be sure to ask your attorney to see if there is a “wild card” exemption available that can cover it. Otherwise, you may have to surrender some or all of your refund to the trustee.

In general, it is not good to claim too few deductions. Sure, you and most people enjoy having the refund once a year, but you are essentially making an interest free loan to the government when you under-deduct. Along with that issue, add the concern about the means test and possibly losing your refund in a Chapter 7 and it is just wiser to claim the actual number of deductions available to you.

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April 1, 2013 - Posted by | Bankruptcy, Chapter 7, Means test, Tax refund | , , , , , , , , , ,

1 Comment »

  1. […] Continue reading here: Tax day, April 15th, is almost upon us! « Kentucky Bankruptcy Law […]

    Pingback by Tax day, April 15th, is almost upon us! « Kentucky Bankruptcy Law | Information About Bankruptcy | April 1, 2013 | Reply


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