As an Asheville bankruptcy lawyer, I advise consumers to protect the things they own by using their available exemptions. In over 95 percent of the Chapter 7 bankruptcy cases filed in Western North Carolina, all of the property a consumer owns fits within the North Carolina or Federal Bankruptcy exemptions. Consumers get to keep all their property in those types of cases, including any tax refunds still owed or already received.
Use your tax refund wisely in 2016.
Tax Refunds Can Be Protected in North Carolina
One type of asset I frequently protect for clients is their tax refund. Usually, we use a ‘wildcard’ exemption which is $5,000 per filer in North Carolina ($10,000 for a married couple filing jointly). In addition, North Carolina law protects (or exempts) two months of wages for a household. So, with careful planning, we can usually protect all the money in a consumer’s bank account at the time of filing.
What if I am owed a refund larger than the exemption limits?
Beyond exemptions, one way to protect your tax refund is to spend it before we file your case. You may be able use your tax refund to pay for a Chapter 7 bankruptcy case. Once spent, it is no longer an asset that needs to be protected. Medical expenses (dental work, chiropractor, etc.), neglected car repairs, and other things necessary for the maintenance of a consumer’s household can also be purchased prior to filing a bankruptcy case if your cash reserves exceed exemption limits. It is imperative to seek and receive professional advice before before spending your tax refund as a method of exemption planning.
Instead of using your tax refund to make minimum payments on credit cards for a few months, doesn’t it make more sense to use that same money to wipe out all of your unsecured debt? If you are in Western North Carolina, contact me for a free, initial bankruptcy consultation to get your questions answered and to develop a long-term solution to your debt problems.
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