In Bankruptcy, whether you keep your tax refund will depend upon the amount of the refund and whether it is protected under your allowable exemptions. When you file, all of your assets are protected from the reach of creditors upon the filing of the case. Whether you keep those assets depends upon whether the assets are exempt. If the assets are not exempt, a trustee may take those non-exempt assets and distribute them to your creditors on a pro rata basis.
How Much Of Tax Refund is Exempt?
As of the date of this blog entry you are entitled to a $1,150 exemption on any property and an additional $10,825 to apply to any assets if you do not use it toward your real estate exemption. So if you do not have real estate or other assets with value, so long as the tax refund is under a total of $11,975, you keep the refund and still can wipe out all outstanding debt.
Consult with a NJ Bankruptcy Attorney to Discuss Refund
If you know you are about to receive or will receive a tax refund, consult with a bankruptcy attorney in one of our NJ offices prior to exploring a filing. We can go over your assets in detail and make a determination relatively quickly as to the amount of exemptions you would be entitled to on the refund and on other assets. We offer a free consultation.