We are about to file Chapter 7 and are getting a Tax Refund....

[armani222]

My husband and I are getting ready to file Chapter 7. Attorney has all of the paperwork and is prepared to file BUT.... we did our taxes today and found out that we are getting back $9,000 as a couple! We were told that we could have 6k in assets each (were in Florida). We were also told that if we received any amount of money back from tax return that it would have to be spent on monthly bills before we can file.

We really dont want to put this off any longer. We have a baby due in July and want to save the money for when we really need it.

What are we allowed to do??
Please help!

[2Bshinyandnew]

My husband and I are getting ready to file Chapter 7. Attorney has all of the paperwork and is prepared to file BUT.... we did our taxes today and found out that we are getting back $9,000 as a couple! We were told that we could have 6k in assets each (were in Florida). We were also told that if we received any amount of money back from tax return that it would have to be spent on monthly bills before we can file.

We really dont want to put this off any longer. We have a baby due in July and want to save the money for when we really need it.

What are we allowed to do??
Please help!

If they attorney told you 6K in assets each, I'm assuming you don't have a house you need to exempt (you rent) and you are each entitled to the $1000 auto exemption, $1000 personal property exemption and the $4000 statutory exemption for filers that are not using the Florida Homestead exemption can use. The $1K auto exemption cannot be used for anything other than automobiles, use it or lose it. The $1K and $4K can be stacked for personal property. The $4K can be used to exempt an auto as well. My point is that technically you really only have $10K total that can be applied to personal property, not $12K. Clear as mud, eh?

If you cannot fit your refund into those exemptions, you must either wait to file and spend it on reasonable and necessary expenses. You will not be able to keep it post BK UNLESS you have no furniture or any other personal property to exempt, OR give up to the trustee any assets, including the refund that could not be covered by the FL exemptions.

You will need to spend it. Car repairs, dental work, new eyeglasses, stock up on diapers, and wipes, anything that is consumable (new baby!!! Congrats!) You can use it to pay rent as the rent becomes due, but you cannot use it to pay rent in advance. If you want to pay your auto insurance in a lump sum, that should be OK, but I would have to check on that

Bottom line, you are "allowed" to spend it on necessities before filing. That's it. If you buy things like a crib, you will have to use part of your exemptions when you do file to cover it, because furniture is an asset. Keep detailed receipts of everything you use the money for.

[keepmine]

I'd not file until the baby is born. Just in case there are unexpected medical expenses that may need to be listed in the bk.

[Trixie007]

Well, we are in the same boat, got just under 9k back from Federal. I posted a more complete list on my blog, but we are spending on: auto repair, dental work, vision, groceries, attorney fees, clothing, and a bit of household items that need to be replaced. We decided that anything left over that we couldn't reasonably spend, we'll just let the Trustee have it... maybe it'll encourage them to let us ease right thru our Ch 7!! I hope.

In your case, I would spend on these types of things (plus baby clothes, diapers, formula), then, if you really don't want to wait, just let the Trustee take whatever's left over. What are you really giving up if you didn't even know about the money? Plus it's probably less than what you're having discharged.

Ok, I think I might get flamed for that, but it's just MHO!

[Over our heads]

I would not stock up on formula. Yes it is expensive, but a lot of stores balk at returning formula. Until you have baby in hand and feeding him (or her) you can't possibly know what type their little tummy will like.

Truthfully, waiting until your baby is here to file would be the best. A crib might be an asset if there is no baby in it, but what trustee (I mean seriously) would take a crib from a baby? Unless of course it is some 45,000$ cinderella carriage type thing gilded in gold leaf!

[izais1102]

chapter 7 after tax refund

I am a "single" (I have a fiance) Mother of 2. I will be getting (God willing) 6500 back. I am spending 1500 on my bk, 1000 on my car, and a lil bit on daily expenses and some bills. I will be left with about 4k after im done. I am afraid that it will be taken when I file by the trustee...Will they be able to? I am hoping to save the money to move. My lease is up next month and because of my bad credit I am having to pay an extra deposit. Can someone please help me with this? My attorney says I should not worry but of course I do.

[keepmine]

You need to ask your lawyer exactly how he intends to exempt the refund.

[okiemom2008]

Does anyone know if you can put your tac refund into a traditional IRA and exempt it?