If you filed for bankruptcy in 2013 and are now expecting your tax refund, you could be disappointed. At Skrupa Law Office, LLC in Omaha and Lincoln, we have witnessed the Chapter 7 Trustee take hold of people’s tax returns unexpectedly and it happens more often than not. However, this should not be happening. Our bankruptcy experts at Skrupa Law have some tips for you.In the state of Nebraska tax refunds and financial assets are protected, but only to a certain extent. There are two exemption laws that protect tax refunds in Nebraska.
Earned Income Credit
This exemption law does not have a dollar limit set and it protects you from losing any portion of your federal and/or state tax refund that is from “earned income credit”.
“Wild Card Exemption”
This exemption shields up to $2500 per person in a tax return, which includes personal property and tax refunds. If a married couple is filing jointly that means they can be protected for up to $5000 together.
Note: If your tax refund exceeds the dollar amount exempted, then the Chapter 7 Trustee can seize the rest of your money that is not earned income credit and over the $2500 limit and give it to your creditors. If you are not sure what your tax refund will be, then wait to file bankruptcy until after the refund is calculated.
Something to avoid at all costs is paying back a family member or friend with your tax refund. This can hurt you in the end because the Trustee can reclaim that money if it is found out. The reason being is that bankruptcy law is designed to guarantee fair treatment to all creditors. So if you owe a family member or friend, they must be treated like all other creditors. Any money given to them must be disclosed at the time of bankruptcy.
Also, if you receive a large sum for your tax refund and spend it and file for bankruptcy not long after, the Trustee will ask how you spent that money and why. At Skrupa Law we can anticipate this question and provide the answer inside the bankruptcy papers. Just be honest and do not try to lie to get out of more debt and you should be okay.
Contact Skrupa Law at (402) 999-0247 (Omaha) or (402) 464-3311 (Lincoln) Today!
Skrupa Law knows a seizure of a tax refund should almost never happen. If it does happen, it is because the lawyer did not perform an in-depth interview with the debtor. Contact us today at our Omaha office at (402) 999-0247 or our Lincoln office at (402) 464-3311 for our expert advice or if you have any questions regarding your own tax refund and bankruptcy situation. We will not let you lose your tax refund if we can help it.