If you have a feeling (or already know) that you may need to file bankruptcy, it's important to pay attention to how you spend your tax return this year before you file.
According to recent polls, the average tax return this year was $3,068 -- although what people receive varies widely based on their personal circumstances. (There are even huge gaps between generations, with baby boomers receiving an average of $5,403 in their tax returns and Millennials only receiving $2,565 on average.)
Whatever you receive, you need to keep track of how you spend it -- and make sure that you don't put the money toward anything that could raise the trustee's eyebrows when it comes time to examine your bankruptcy claim. Otherwise, you may find that your tax return complicates your bankruptcy unnecessarily.
While a lot of Americans use their tax returns to pay for family vacations or other luxuries, that's not what you want to do if you're planning to file bankruptcy. Nor do you want to put the money on your credit card debts if you're planning on discharging them.
So, what's left? Here are some possibilities that the bankruptcy court will generally find acceptable:
- Pre-paying your rent or utilities (or catching up on past-due amounts). These are necessary living expenses, so they're always acceptable.
- Paying for repairs to your home (assuming you intend to remain in it after your bankruptcy) is always wise.
- Auto repairs and general maintenance to the family car is also an acceptable use of your funds.
- Clothing and shoes that you and your family need, or other basic necessities.
Keep the receipts for your purchases so that you can turn them over if the trustee asks for them. That way, you won't be caught by surprise.
If you're ready to get a fresh start through a Chapter 7 bankruptcy, talk to our office today about the steps you need to take to get started.