Tax Refunds and Bankruptcy in Napa

February 14, 2023
Napa Tax Refunds

You may be feeling overwhelmed about your finances and wondering if bankruptcy is the right solution for you. You are not alone.

According to CNBC, the median income fell 3%, while the cost of living rose nearly 7%. Thousands of Bay Area residents count on their tax refunds to catch up on past due car notes, mortgages, and utilities. It’s reported that Pacific Gas & Electric natural gas bills increased by 32.6% and electricity jumped 15.4%.

If you’re wondering what happens with Napa tax refunds in bankruptcy, here’s what you need to know.

Bankruptcy: What Happens to My Tax Refund?

All your assets automatically become part of your bankruptcy estate when you file for bankruptcy. Your bankruptcy estate includes your tax refund.

Rather than putting your tax refund into your bank account if you are considering bankruptcy, it is best to spend the refund on necessary expenses. These essential expenses include utilities, car notes, car repairs, medical bills, shelter, and food.

Before filing for bankruptcy, keep the receipts and the paid bill statements.

Tax Refund and Chapter 7 Bankruptcy

Chapter 7 bankruptcy differs from Chapter 13 bankruptcy in regards to tax refunds.

Chapter 7 is liquidating assets such as credit cards and personal loan debts. Marital status and whether or not you and your spouse file Chapter 7 together will determine how much the tax refund is part of the bankruptcy estate.

The time of filing Chapter 7 and when you received your tax refund matters. If you received your 2021 tax refund and plan to file a Chapter 7 bankruptcy on May 1, 2022, 100% of your tax refund is part of the bankruptcy asset. Your 2023 tax refund will also be prorated as part of your bankruptcy asset.

A percentage of your tax refund can be protected under bankruptcy exemptions. A tax refund and bankruptcy strategy can be prepared with the help of one of our experienced attorneys.

Tax Refund and Chapter 13 Bankruptcy

Chapter 13 filings are usually filled by individuals who will pay back debts with a three-five-year plan. These debts can include mortgages in a loan forbearance plan, delinquent car loans, and credit card debt.

Chapter 13 requires you to include all your disposable income for the entire duration of your repayment plan. Your tax refund applies to your Chapter 13 repayment plan each year. Unlike the Chapter 7 bankruptcy, you may be obligated to pay your tax refund once, depending on the decision made by your assigned trustee.

If you incur unexpected expenses outside of your Chapter 13 plan, you can discuss a plan modification with one of our experienced attorney’s receiving a portion of your tax refund. The unexpected expenses that qualify for a plan modification may include funeral, medical, or dental expenses.

California Bankruptcy and Exemptions

Your goal should be to put together a bankruptcy strategy before filing bankruptcy to keep a significant portion (or all) of your tax refund. There are two sets of California bankruptcy exemptions, including a Wildcard option that an experienced attorney can walk you through.

Before filing for bankruptcy, a lawyer in our Oakland, California office can help you:

  • Maximize your exemption availability
  • Strategize the best payroll deduction

Adding bankruptcy exemptions and changing your payroll deductions may be the formula to keeping more of your tax refund.

Schedule Your Napa Tax Refund and Bankruptcy Consultation Today

It is essential to speak with a Napa attorney who can help you get your finances back on track quickly. Don’t let fear keep you from making a change for the better.

Contact us today and get started on your fresh start with a free 15-minute consultation.


Reach Out to an Oakland Real Estate Attorney Today

Disputes concerning real estate can have a significant financial impact on individuals and businesses alike. If there is a dispute and it appears that a compromise is not possible, it may be necessary to initiate litigation. This could mean participating in settlement or mediation talks or even bringing a formal lawsuit to civil court.

An Oakland real estate lawyer may be able to help. They are prepared to take the lead in settlement talks that could help to avoid costly court cases. However, if the case does go to court, they will take every step necessary to protect your rights. Contact us now to learn more.

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