Eric Lanigan explains in a new video that one of the biggest traps in bankruptcy is dealing with federal income tax refund and what to do with it during bankruptcy. This is a common problem, seen all the time in bankruptcy and the video that Lanigan has on YouTube that explains this situation called, “Preventing Forfeiture of Tax Refund in Florida Bankruptcy.
This tax refund issue is something that people have to be very careful about. Very often as we reach the end of the year we tell people that what we’re going to do is get everything ready to file their bankruptcy said Lanigan, a Winter Park, Florida, bankruptcy lawyer.
You Have to Know When to File
“But we are not going to file it until they have filed their tax returns and spent it so that there will be nothing left for the trustee to claim as non-exempt assets.”
Lanigan said that a tax refund is a debt owed to you by the federal government and while it’s like any other debt that you may have people often forget to state that it’s coming to them. A tax refund, Lanigan said, is an asset that you own and if it’s not exempt the bankruptcy trustee is entitled to take it and he said the trustee will take it every single time.
If you are filing a bankruptcy petition October 1, 2013, it is the first day of the fourth quarter of the year. You will have already accrued nine months or three quarters of the refund. But you are not going to get it until the following February or later. But the money has accrued and it is owed to you.
You’d Better Remember Your Honest Answers
You file bankruptcy October 1, but forgot the tax refund is money owed to you. You go to the 341 meeting with the trustee and get hit with the question, “do you expect to get a tax refund?”
You answer yes and add that last year you got $4,000 and expect to get the same amount this year.
“The first thing that you’re going to hear from the trustee is that the trustee gets $3,000 of the $4000,” Lanigan said.
“Well, they do get that because they’re entitled to 75% of what will ultimately be the total accrued. If you clarify that 75% is what occurred between January and October 1, the day you filed, then, this is the correct amount.”
Many people lose this money simply because people never think of the fact that they are always owed money by the federal government. It accrue monthly.
Here’s an Example of Tax Refund Timing Issues
Here’s an example he’s seen when people have filed in January or February. They think that in the next couple of weeks they’re going to get a $5,000 or $10,000 check.
“Well guess what? They suddenly find out that the amount they’re going to end up with is nothing,” said Lanigan whose clients don’t have this issue.
“I can’t tell you how many times I’ve been in the bankruptcy court and watched a do-it-yourselfer suddenly learn that the five or $10,000 tax refund is going to be forfeited to the bankruptcy trustee,” Lanigan said.
Eric and Roddy Lanigan of Lanigan and Lanigan remind everyone who is online looking for an attorney to always remember in bankruptcy that the devil is in the details. So if you think you have this kind of issue, seek professional advice. You may reach the Lanigans at 407-740-7379. Their office is located at 831 W. Morse Ave., Winter Park, FL., 32789.