What Happens to Your Tax Refund in Bankruptcy
When filing for bankruptcy, one of the most important concerns is what will happen to your tax refund. Navigating the world of bankruptcy and taxes can be a tricky process, and it’s important to have a clear understanding of how filing for bankruptcy might affect your tax return.
Depending on the type of bankruptcy you file, your tax refunds may or may not be exempt from claims against you. In Chapter 7 Bankruptcy, any income you are entitled to receive after filing is considered property of the estate and creditors may assert a claim against it. This includes income from wages, inheritance or even an IRS refund check. On the other hand, if you file for Chapter 13 Bankruptcy which focuses on reorganizing debt rather than liquidation, then all refunds that are obtained while in repayment plan are protected from creditors by law.
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