Question Ch. 7 and tax refund?

[munchkn813]

I have tried doing some searching on here before asking, but what I am reading is confusing me...

We were planning on filing for ch.7 bk in the next month or so (met with our lawyer on the 21st and got all the paperwork to start filling out), as soon as we could get the $ saved up from not paying our credit cards. Of course our crap car needed a new $330 new starter in it last week so there went that saved up money... Now I am worried about our tax refund though. I expect that we will probably get somewhere around 4K back from it (we have 2 children). If we file and were to get our refund during or shortly after the whole bk process...is the money up for grabs? If we wait to file until after we get our refund and use the money to help us finish getting caught up on house, car and utility payments and a bit on some medical bills that I want to pay off regardless of the bk (I know not to pay any large sums but our lawyer said I could continue my smaller payments each month) and use the rest to pay for the lawyer, stock up on some groceries, etc...is this okay?

I really don't want to wait to file, esp. since the calls are coming in like crazy already after not paying bills just since the 12th and are coming into my cell phone already (I am trying to answer most calls, but with 2 little ones I had to hit the do not disturb button on the phone) and the calls have my husband a nervous reck (and me a bit, but handling it okay so far) but I don't want to lose all of our tax return! I read some things about exemptions...but some saying trustees took portions of money and some not and now I am just confused!

So how does all of this work with timing of filing and the tax return? (I am in IL and my husband and I are doing a joint bk) Is there a way to save our refund? or do I need to wait to be safe? Or am I out of luck either way? Thanks!

[lrprn]

So how does all of this work with timing of filing and the tax return? (I am in IL and my husband and I are doing a joint bk) Is there a way to save our refund? or do I need to wait to be safe? Or am I out of luck either way? Thanks!

The key is how much of the $4K can be protected by your IL bk exemptions if you file before the tax refund comes back. (And I'll skip the lecture about how foolish it is to let Uncle Sam be your savings account interest-free for a year, because it's too late to help your situation now.)

Illinois recently updated their exemptions and now has a $4K "wild card" for personal property that could be used to protect your expected tax refund if you filed now - http://www.thebankruptcysite.org/exe.../illinois.html .

The key here is what else you may need to use that $4K to protect if you file.

If you haven't done so yet, it's time to set up 3-4 appointments for free consults with experienced bk lawyers in your area. Put the tax refund question on your list of questions to ask each lawyer during their interview.

Good luck to you! And in the future, figure out a way to reduce your tax refund and keep that money instead in an account that's earning interest for you!

[ben1381]

tax refund

My best advice would be to file your tax return asap in the new year if at all possible and file bk afterwards. This is what I am planning to do. I would even file an incomplete return that gets you most of your refund asap and file an amended return later on. I would say the same thing regarding your state income taxes also. Also unless you have actually been sued I would ignore phone calls from creditors as it usually takes them 6 months before they sue. And if you are filing BK anyway I doubt your credit score is a big issue either.

[ben1381]

One more thing I should add. Spend the tax refund money to pay your bk attorney or other necessary expenses before you file so that it would be much harder for the trustee to go after that money.

[Naomi]

(And I'll skip the lecture about how foolish it is to let Uncle Sam be your savings account interest-free for a year, because it's too late to help your situation now.)

The "refund" may be coming from EITC and Child Tax credits. Some people pay $0 federal taxes and still get back thousands, so...can't really do anything about that.

To the op: can you wait awhile longer to file? How long has it been since you stopped paying credit cards?

If possible, I would hold off on filing until after you receive your return. Spend it on your lawyer and other allowable/legitimate expenses like ben suggested and then file.

[munchkn813]

Thank you for the replies. My husband is going to freak out when I tell him maybe we should wait afterall to file. I may go ahead and call our tax guy and set up an appt. for the begining of Feb so that we don't have to wait for an appt. once we do get our W2s (not sure when I will get mine as I just went back to work this summer and hubby got his end of Jan last year) to help speed the process of getting our money back and getting this stuff moving!
I just stopped paying 99% of the credit cards on 12-12. I had like 2 that hadn't been paid from the end of the previous month because I didn't have the money for them (were like $100 min payments). We have about 30 credit cards though, so the calls are really coming in now! I have been turning the do not disturb button on the phone on so it doesn't even ring, but if I would see the phone light up from a call I would answer it. Today the first 6 calls I got - turned the phone on(within 45 mins! one was a local wrong number, grr) they ALL hung up on me once it got past 'all our operaters are busy, please hold... *CLICK*) Was just trying to answer some to stop the calls for a day or so from them as they were starting to call my cell phone already. =/ Gonna be a long couple of months. I didn't want to not answer and them start calling anyone else (like DHs cell from his previous job that they prob gave to a co-worker...I'm sure he doesn't want them knowing what's going on and I am not sure which cards have his cell as a contact # so not calling them all to find out.

I already got the paperwork from the lawyer we had chosen, but a couple of questions of come up since our meeting with him (on 12-22) so I think I will be giving them a call back to double check what he says about some things like the tax return (and to the pp...it is such a large amount because we have children).
My husband has been freaking out about getting all the money for the lawyer this week (we both just got paid a couple days ago) and I am stressed because he doesn't understand...I just stopped paying the credit cards a couple weeks ago...we actually are using cash to buy our groceries and gas instead of credit cards now...that $1,000 didn't just magically appear because I stopped paying the bills. I also am trying to get caught back up on other bills, so really it would be a relief to me to have a real excuse to get him to relax and off my back about getting the lawyer like tomorrow! =/ Guess I will give him a call on Monday! Thanks!

As for the wild card...is that where we can put things like my laptop, Wii, big screen tv (just a flat screen, not plasma), sewing machine, etc? We are holding onto baby things too like the swing, bouncy seat, saucer, high chair, jumperoo, etc too in case we have another in the future once finances are under control... Do we put all of this stuff and my girl's toys in that section too? Our family and friends spoil them so they have quite a lot... I think the wild card section will fill up much faster than we think and we would relaly need to wait to file if we want to see any of our return!

[nerves]

Most if not all the items you listed above will fall under household exemptions. I think it depends on your state. We were able to list all of our similar possessions under household. When determining the amount of your personal belongings as such - they should be valued at garage sale prices. Remember to keep personal attachment to your things out of the determination of their actual value to someone else. Best of luck to you.

[munchkn813]

Ohh, okay, thank you! I looked over all the paperwork right after I received it, but there were 2 huge packets so a lot of info. It was pretty overwhelming so I have just sat on it since then. Guess I better just open it all up and look over it again.