Wait until you have received your tax refund before filing bankruptcy in 2013

              Quite often I believe the new clients come to my office for an initial consultation expecting that I will file their petition that day within 15 minutes and that after they leave Halcomb Singler that they will no longer have any debt.  Almost every client I meet with also tells me that they want their bankruptcy over RIGHT AWAY so that they can move on with their lives.  I completely understand.  Once a person seeks information regarding bankruptcy in Indiana and makes the decision that bankruptcy can be of assistance in solving their debt issues they want to put it behind them so that they can get the fresh financial start that they need.

             I can say that I have never filed a person's bankruptcy petition the first day I met them.  There is simply too much information that I need to determine whether bankruptcy will be helpful for them, whether they should file a Chapter 7 or Chapter 13 bankruptcy, and to get documents from them such as pay stubs, tax returns and billing statements.  That does not mean that a bankruptcy petition cannot be filed quickly if necessary....but it does mean that I cannot just snap my fingers and make the debt go away.

            However, sometimes it is not a great idea to file a bankruptcy right away.  For example, anyone who files a Chapter 7 bankruptcy in Indiana today and is entitled to an income tax refund for 2012 is likely going to have that income tax refund intercepted by the bankruptcy trustee.  That's right.  The bankruptcy trustee has the power to take your tax refund before you ever get it to distribute it to your creditors.  If that same person waited to file bankruptcy until after they had received their income tax refund (and likely spent the tax refund) then they would get the benefit of that refund instead of the trustee making a distribution to their creditors.  It is important to note that, in most circumstances, the tax refund cannot be put into a savings account to start the funding of an emergency fund.  The reason is that in Indiana a Chapter 7 debtor is only allowed to have $350 that is protected from creditors on the day that they file as an individual, or $700.00 if they are filing a joint bankruptcy.

            So what if you expect a $3,000.00 refund??   If you can't save it and the trustee will take it if you file a Chapter 7 bankruptcy then what do you do?  What I typically see with my Indianapolis area bankruptcy clients is that the debt that they need to discharge in bankruptcy has been creeping up on them over time.  And, over time they have been attempting to pay off the debt.  This means that there have been many things that they have not been buying in an attempt to pay off their debt.  Often, this means that my client hasn't been buying clothing, hasn't been properly maintaining their home or vehicle, and hasn't replace anything in their household such as a new set of pans or a mattress, etc.   The client may have been putting off some dental work that is causing them pain or perhaps even a medical procedure due to the strain on their finances.  Getting the healthcare you need may be a great way to use an income tax refund that you aren't able to save, but also don't want to just "fritter away" on unnecessary stuff.

           Every person and every bankruptcy case I handle is different.  After meeting with each person or couple and getting a basic understanding of their finances I can recommend a plan moving forward.  If you are thinking of filing bankruptcy in 2013 I offer a free initial consultation.  If you decide to file bankruptcy our firm offers flat fees which can be paid over time on a payment arrangement.  Just cal (317) 575-8222 or click here to set up your consultation.

Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.