I hope that your new year is off to a good start. Today’s blog post is about the importance of the timing when filing your for bankruptcy protection, especially when it comes to your taxes.

If your petition is filed before you receive and spend your 2010 tax refund, the trustee will use 100% of the refund to pay your creditors, as there is no law protecting the tax refund. Since, this is typically not the preferred outcome, the better way to time your filing is to wait with the filing of your bankruptcy petition until after you have filed your tax return, received your tax refund, and spent the tax refund on exempt items, then file the petition. Furthermore, since a lot of our clients are worried about how to come up with the fees and costs to even afford the filing, being smart and protecting your tax refund by receiving it first, usually helps alleviate this worry as well.

When filing in 2011, your 2010 is not the only tax year you need to worry about. This is because regardless of when you file, your creditors – through the trustee – are entitled to the pre-filing portion of your 2011 tax return. For example, if you file on August 31, 2011, the creditors will receive approximately 8/12ths of your 2011 tax refund, even though you won’t even receive that until 2012. For a $1,200 refund, that would mean $800 goes to your creditors. Therefore, filing early in the year allows you to protect most – and sometimes even all of your 2011 tax refund.

Therefore, typically the best time to file for protection under the bankruptcy laws is immediately after receiving your tax refund, as early as possible in the new year. We encourage you to contact us as soon as possible and set a timeline for filing in the next couple of months, so that hopefully next year, you won’t even have to worry about it anymore.

CALL OR EMAIL TODAY! Steve and I are ready to assist you in getting your fresh start, and putting a permanent end to harassing creditor calls!