Tax Credits and Bankruptcy
When it comes to filing for bankruptcy, there are a few things you should know about tax credits. For starters, if you're considering using your tax refund as a way to pay off some of your debt, you might want to think again. While it's true that you can use your refund to pay off creditors, this could actually end up hurting your chances of getting a discharge in bankruptcy.
That's because any money that you use to pay off creditors before filing for bankruptcy is considered a "preference payment." And preference payments can be subject to being reclaimed by the trustee overseeing your bankruptcy case. So, while using your tax refund to pay off creditors may seem like a good idea at first, it could ultimately backfire.
Another thing to keep in mind is that if you do file for bankruptcy, any tax credits that you're owed will likely be wiped out.
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