Many Oklahomans count on their income tax refund each year to catch up on car payments, mortgage payments and to manage necessary living expenses, and losing this refund in a Chapter 7 bankruptcy filing is a real concern for a lot of people. Because a specific answer to this question can only be given based on your individual situation, your best bet would be to contact an experienced bankruptcy attorney in Oklahoma to discuss your legal options. Our bankruptcy lawyers at Oklahoma Legal Center have years of experience helping Oklahomans relieve overwhelming debt, and they are standing by, ready to answer all your bankruptcy questions. In the meantime, the following information can help give you a general idea about whether or not you are at risk of losing your income tax refund if you file Chapter 7 bankruptcy in Oklahoma.
Chapter 7 Bankruptcy and Income Tax Refunds
First and foremost, it is important to be completely honest with your bankruptcy attorney in Oklahoma about your income tax refund. Under Oklahoma bankruptcy laws, there are certain statutes in place that can protect your income tax refund, but it’s important that your bankruptcy lawyer has all the information he or she needs to give you quality legal advice. In Oklahoma specifically, if you file your bankruptcy case after you receive your tax refund, and you spent your refund on exempt property (household goods, clothing, food, home and vehicle repairs, mortgage payments), there is no reason to worry about your refund being taken by your Chapter 7 trustee. However, there are other ways you could spend your income tax refund that could cause a problem in a Chapter 7 bankruptcy filing. For example, if you use the refund to repay owed money to a relative, or to pay off a credit card, this is considered a “preferential transfer,” which basically means you treated one creditor more favorably than the others. Under these circumstances, a Chapter 7 trustee could force the relative or credit card company to turn over the money.
Our Bankruptcy Attorneys Can Help
On the other hand, if you file a Chapter 7 bankruptcy before you receive your tax refund, you are required to disclose the tax refund in your bankruptcy documents as an asset. Under Oklahoma law, an income tax refund is considered a non-exempt asset, which means it can be taken by your Chapter 7 trustee to repay your unsecured creditors. If you file your bankruptcy petition before January 1, the Chapter 7 trustee may take a portion of the refund attributable to the months before you filed your bankruptcy case. If you file your bankruptcy after January 1, but before you get your refund, the trustee can take your share of the entire refund. If you are considering filing Chapter 7 bankruptcy in Oklahoma, and you are concerned that you might lost your income tax refund, contact our knowledgeable bankruptcy attorneys at Oklahoma Legal Center for legal help. Our team of experienced bankruptcy lawyers can help you assess your financial situation and determine whether Chapter 7 bankruptcy is right for you.