Best Possibility of Saving a Large Tax Refund from Trustee?

[BrokeTwinkie]

My wife and I finalized an adoption in 2012. We had related expenses paid in 2011 and 2012, which we were hoping to claim on our 2012 year tax return via the Adoption Tax Credit. This could potentially result in a large refund...$6-10K, depending on how the numbers work out.

What is the best way, if any, to maximize the chances of benefiting from this refund?

We are hoping to file a Chapter 7 in March 2013.

A couple of attorneys have advised us to file our taxes ASAP in January, hope we get our refund by February, and spend it before we file.

What about not claiming the adoption credit when we file now, then amending our 2012 taxes when we file our 2013 taxes?

Frankly, if we have to lose it, then I'm willing to lose it to wipe out the $80K of unsecured debt through our bankruptcy. But, at the same time, I would really like to recoup some of our adoption expenses and be able to use the money to help out my parents.

I don't really want to wait past March to file due to a pending lawsuit from one of my creditors. I'm trying to stall the lawsuit and get filed before any judgements come down the line, which I should be able to do until March. But, waiting past March would mean July or later, and I don't think I can hold them off that long.

[HHM]

A couple of attorneys have advised us to file our taxes ASAP in January, hope we get our refund by February, and spend it before we file.

That is about all you can do

What about not claiming the adoption credit when we file now, then amending our 2012 taxes when we file our 2013 taxes?

That is fraud.

Also, if you have already earned the credit, then it is earned. It really doesn't matter when you file your tax returns. So not claiming it and then amending to claim later would be a blatant attempt to conceal an asset from the BK trustee which would result in having your discharge revoked, the trustee getting the money, and you will owe every debt you included in the BK and never be able to discharge those debts in the future.

[AngelinaCatHub]

That is about all you can do



That is fraud.

Also, if you have already earned the credit, then it is earned. It really doesn't matter when you file your tax returns. So not claiming it and then amending to claim later would be a blatant attempt to conceal and asset from the BK trustee which would result in having your discharge revoked, the trustee getting the money, and you will owe every debt you included in the BK and never be able to discharge those debts in the future.

I strongly agree with HHM. It is a constructive BK and frowned on by BK Judges. It would be better as HHM said is try to collect before you file. Still, it could cause you trouble knowing that it was coming, then spending it, then filling. I would think very close about this. It could also be misconstrued as orchestrating a fraud. Best to check with your lawyer. 'Hub

[Charlie777]

I agree as well, don't risk it.

Work with your attorney to see if you can use any exemptions to protect some or all of the refund.

[momofthree]

I would really like to recoup some of our adoption expenses and be able to use the money to help out my parents.

Do NOT give your parents any money until after your bk is completed. You will have to list any gifts/transfers on your petition, and anything over a certain dollar amount will be taken back by the tt. That doesn't do you or your parents any good.

[HHM]

I think the adoption credit is subject to some protection in BK. Your attorney needs to do some digging around, but bouncing around in my head is the idea that the adoption credit might not be subject to the BK, but I have nothing to support that idea and apologize, don't really want to go digging round to find out.

[LadyInTheRed]

I think the adoption credit is subject to some protection in BK. Your attorney needs to do some digging around, but bouncing around in my head is the idea that the adoption credit might not be subject to the BK, but I have nothing to support that idea and apologize, don't really want to go digging round to find out.

From my research, it depends on the state's exemptions. HHM, you may be thinking of an Illinois case where the bankruptcy court ruled that the adoption credit was a public benefit and therefore exempt under Illinois law which exempts public benefits

735 ILCS 5/12 1001: Sec. 12 1001. Personal property exempt. The following personal property, owned by the debtor, is exempt from judgment, attachment, or distress for rent: ...(g) The debtor's right to receive:
(1) a social security benefit, unemployment compensation, or public assistance benefit;

The IL exemption appears to be broader than the NV public assistance exemption. Here's a link to NV exemptions with links to the actual laws providing the exemptions: http://www.legalconsumer.com/bankrup...-law.php?ST=NV. I haven't read the actual law for all of them. It's possible there is an exemption that arguably could apply to the adoption credit. The adoption credit was not refundable until 2011. So, without a broad exemption, I doubt many state laws have been amended to specifically exempt a refund based on that credit. Consulting a NV bankruptcy attorney is the best way to get an answer to the question.