Question Income tax before filing

[toryan]

We will be filing bankruptcy within the next couple of months. We are still trying to work something out with the bank on our mortgage. Anyway my question is we had our taxes done today and will be receiving close to $10,000 back how are we allowed to spend this? How much can we save back when we file? Will we have to prove where the money went?

[JoeBankrupt33]

What state are you in? This will determine how much you can keep without spending it and may affect what you can spend the money on.

[Meatstick]

We are in the same predicament Toryan. We filed our 2009 returns last Friday and combined State and Fed we are getting back $12k. We live in Arizona which has no specific exemption for Tax Returns and also doesn't have any Wildcard that can be used. Per our lawyer we can spend it on 6months of Food, Dentalcare, Auto-repairs and if we have any left we then need to contact him to see what we can do. There is likely no way we can spend that amount down so we are pre-pared to surrender a portion back to the TT.

Good luck with yours.


Meatstick

[toryan]

Ohio

[waitin2befre]

Toryan
I have the same question that you asked, thank you for asking.
I am to understand that you haven't filed bankruptcy as of yet.
Neither have I and I am also wondering how long after receiving
the refund do I have to answer as to how it was spent?
I'm in Indiana, and will be filing soon and most likely a 13.
My refund will probably be somewhere in the neighborhood of 3000.
Mine will be spent on Home repairs, Vehicle repairs and paying the lawyer.

[OhioFiler]

You have a cash exemption and a wild card exemption in Ohio. Neither will approach $10K.

You can spend your refund on normal living expenses, home repairs, auto repair, medical expenses....stuff like that. Don't plan a trip to Aruba.

[l1th1um]

I have a similar question and didn't want to open a redundant thread: I will be receiving my income tax refund, around 9k, this coming Friday. I plan to file chapter 7 in the next month or two. Will they have any claim to my refund? What if I already spent it and they ask for it when I go to my hearing? I'm confused on this whole subject and my lawyer is of no help...he will not answer questions and has no time for me... sucks, I know but, I can't afford to pay someone else at this point, I already have him half paid off. I am in Ohio also, and most of my refund is Eic and child tax credits. Under 2k of it is the actual refund because I overpaid, or whatever.


I apologize if I seem totally uneducated on the subject of bankruptcy...as I am. Any advice or facts you can share would set my mind at ease as I hear two conflicting things from reading through other posts on this topic... some say they want receipts for everything I buy and I can only buy certain things, others say the Eic and tax credits are totally exempt. What's the real story? thankyou in advance for responding.

[ValleYum]

I have a similar question and didn't want to open a redundant thread: I will be receiving my income tax refund, around 9k, this coming Friday. I plan to file chapter 7 in the next month or two. Will they have any claim to my refund? What if I already spent it and they ask for it when I go to my hearing? I'm confused on this whole subject and my lawyer is of no help...he will not answer questions and has no time for me... sucks, I know but, I can't afford to pay someone else at this point, I already have him half paid off. I am in Ohio also, and most of my refund is Eic and child tax credits. Under 2k of it is the actual refund because I overpaid, or whatever.

I apologize if I seem totally uneducated on the subject of bankruptcy...as I am. Any advice or facts you can share would set my mind at ease as I hear two conflicting things from reading through other posts on this topic... some say they want receipts for everything I buy and I can only buy certain things, others say the Eic and tax credits are totally exempt. What's the real story? thankyou in advance for responding.

Welcome. Don't apologize!! Most of us felt the same way at some point - so we know how overwhelming all of this can be. You are in a good place.

The Ohio exemptions statute that went into effect on October 1, 2008, § 2329.66(A)(9)(g), exempts from creditor claims in bankruptcy the Child Tax Credit and the Earned Income Tax Credit claimed on federal income tax returns. So the money you got from those is exempt. The rest of your refund can be taken by the Trustee less the $400 you can exempt for cash and the $400 wildcard. Ohio's exemptions aren't very generous - you may need the wildcard elsewhere. And remember, too, if you use the $400 cash exemption for your tax return, that will take the place of any money in your bank account that you have on filing day.

Ugh, your attorney. I know you've already paid him half - but if he is horrible now - aren't you worried that it can only get worse later? A bad attorney can mean money is lost or even that your discharge can be put in jeopardy. If he can't answer a simple question about your tax refund now... Wow. It might be the best money you ever spent just to walk away from him and use the part of your refund that isn't exempt (the under 2k minus your Ohio cash exemptions) and find a new lawyer. If you do decide to find one - don't rush to hire one - find one who you get that good vibe from.

If you decide you have no choice but to keep your attorney (no judgments it is your life and your choice) - do make a list of questions to ask him the day you walk in to pay him more money. Cash in hand = questions answered.

Take care of your kids and yourself. Do what you need to do. Read here and ask questions. You will learn so much. I wish you the very best.

[l1th1um]

Thank you very much ValleYum, this is what I have been reading on different attorney websites, and whatnot. It's really good to see the statute sited and sourced so I can feel more confident about spending this money as I had wanted to (not on bigscreens lol). I don't make much money and these large refunds are usually a way for me to catch up on utilities, fix my car and pay up the rent a little bit. Not to mention catching up on the kids, they all need new things. I am not too worried about the rest of the refund, if they want it they can take it. I live paycheck to paycheck, and as far as the bank account being full lol it's only full on payday, then my bills take over. I can claim that 400 + 400 in the refund as the exemption and pay off/find a new attorney with the rest. Good idea.

I am happy to know that the majority of the refund will be safe. We all need so many things and it's good to know I can safely buy them.

I may have to find another attorney... you're right, I'm acting like he's paying me and in reality I am paying him and I deserve to be treated like a paying customer. I am treated better at McDonalds lol.
I'm not bummed about this bankruptcy, I see it as a way to turn around, with an adult mentality and not get buried underneath "credit" again. I made these bad decisions as a young adult, unaware that one day the credit would run out... and I would still have to pay the bill. Everyone deserves a second chance!
I digress, but, again thank you so much for your response.

[ValleYum]

You are more than welcome, l1th1um. Make sure you keep good records of where you spend the protected $$ 'just in case' and please ask an attorney to be super-de-dooper sure!!

So is your forum name = lithium? LOL Valium and Lithium I just thought that was funny!

[l1th1um]

Lol yep, good ol' Lithium and Valium

[daylate]

I would wait to file until I had the money spent. What difference will a couple of months mean? If there is some very valid reason why you have to file then go ahead but otherwise what is the rush? Living paycheck to paycheck and with kids it shouldn't be hard to spend the money on food,household supplies clothes.doctors,dentists,car repairs, etc. Also try and time your filing so you can pay the next month's rent,utilities,insurance, etc ahead of when you normally do. Right before payday is good too. I believe you can exempt 75% of your earned wages not yet paid. That might work to your advantage. Good luck.

One other thing to think about. Since you will receive your return before you file, I think it loses it status as a return and becomes cash. If so then I'm not sure the EIC and Child Tax Credit are really exempt. If the return was still to be received then I would agree with ValleYum's post with the Ohio statute. Something you should make very sure of. And to be on the safe side if in fact the exemption continues post receipt I would put it in a separate bank account so there is no misunderstanding of what it is. If it is co-mingled with other cash then that could be a problem. Similar to receiving social security. Just saying be sure about this so that you don't get blindsided.