What Happens to Your Tax Refunds When Filing Bankruptcy in Kansas or Missouri?
Tax season is here, and many families are eagerly awaiting their refunds from the IRS, Kansas, or Missouri. If you’re considering bankruptcy, you may wonder whether your tax refunds are safe or if they’ll be turned over to creditors. The answer depends on the type of bankruptcy you file and the exemptions available in your state.
Tax Refunds in Chapter 7 Bankruptcy
- Kansas: In a Chapter 7 bankruptcy case, tax refunds are generally not protected and may need to be turned over to the trustee. However, Kansas provides an Earned Income Credit (EIC) exemption, which protects the portion of your refund associated with the EIC.
- Missouri: Tax refunds are also not specifically protected in Missouri Chapter 7 cases. Although there may be opportunity to protect both EIC and Child Tax Credit. In addition, Missouri debtors can use a wildcard exemption to protect at least part of their tax refunds.
Tax Refunds in Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy case, the treatment of your tax refunds depends on your specific circumstances:
- Kansas and Missouri: Whether you’ll need to pay over your tax refunds during the case depends on your income, expenses, and the terms of your repayment plan. In many cases, debtors can keep their refunds if they demonstrate a real need for the funds.
Strategies to Protect Your Tax Refund
- Spend Down Before Filing: Use your tax refund on necessary and approved expenses, such as:
- Paying for bankruptcy attorney fees
- Catching up on rent or mortgage payments
- Purchasing essential household items
- Addressing critical car repairs
- Adjust Withholdings: Consider reviewing your tax withholdings to minimize future refunds. Receiving a smaller refund reduces the amount at risk in bankruptcy.
- Use Exemptions: Work with an experienced bankruptcy attorney to maximize exemptions and protect as much of your refund as possible.
Can You Use Your Tax Refund to File Bankruptcy?
Yes! In both Kansas and Missouri, it is acceptable to use your tax refund to pay for bankruptcy attorney fees. This can be a great way to invest in a fresh financial start.
Why Now Is the Best Time to Act
Tax season is an ideal time to evaluate whether bankruptcy is the right option for you. If you’re overwhelmed by debt, using your tax refund to file for bankruptcy could be the first step toward financial freedom. At Walden Legal Solutions, we’ll guide you through the process and help you protect your hard-earned tax refunds.
Schedule your stress-free consultation today!
