Filing Bankruptcy or Filing Taxes: What You Should Do First

If you face the prospects of filing for bankruptcy, you will need to plan for many things. One of these involves filing your tax return, especially if you are expecting to receive a refund. In some situations where you file bankruptcy before filing your taxes, you may have the unpleasant surprise of finding out your tax return will be fair game to creditors who want to recover money for any debts owed them. If you are facing this difficult decision, speak with Brooklyn bankruptcy lawyers at the Ursulova Law Offices.

Rules Vary Among States
Since bankruptcy exemption rules vary among states, it is imperative you assume nothing during this process. If you do, you’re sure to make costly mistakes along the way. Unfortunately, most states do not offer exemptions allowing you to protect a tax return. If they do, it is usually less than $1,000. However, you may be able to take advantage of what is known as a wildcard exemption, allowing you to protect any property you choose. To learn if this will be an option in your bankruptcy case, consult immediately with Brooklyn bankruptcy lawyers at the Ursulova Law Offices.

Timing is the Key
When questions surround whether or not you will be able to protect your tax refund, the best course of action may be to delay your bankruptcy until you have received your refund and spent it as you wish. This is known as converting bankruptcy assets, which may or may not work in your favor. Depending on which type of bankruptcy you file, the court may disapprove of you turning a nonexempt asset into one that is exempt, which could potentially complicate your case.

Rather than make a mistake that adds increasing difficulty to your financial situation, discuss your options in greater detail by consulting today with Brooklyn bankruptcy lawyers at the Ursulova Law Offices.