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Use Your Tax Return to Help File Bankruptcy

We all have a tendency to spend a little too much over the holidays. As the bills begin coming in over the course of January, it is easy to find yourself falling behind on your payments. If you have been struggling to stay on top of your debts, filing for bankruptcy can provide the fresh start you need in the new year. Filing for bankruptcy at this time of year also allows you to rely on tax returns you will likely be receiving. Refunds you may be entitled to can help offset your costs and can help rebuild your financial security. 

Bankruptcy and Your Tax Refund

Credit card and loan companies often engage in lending practices that take advantage of consumers. They make racking up large amounts of debts easy, then charge high-interest rates and penalties for late payments, which makes it difficult to ever get caught up. You can easily find yourself in an endless cycle of making minimum payments and fielding calls from creditors while watching your debt accumulate and your credit rating drop. 

For otherwise honest, hard-working people, bankruptcy can provide a solution. Filing at the beginning of a new year, which is also right around tax season, can provide certain benefits. If you owe money to the Internal Revenue Service (IRS), filing for bankruptcy may be able to clear away past penalties and stop any impending judgments or liens. If you are eligible for a refund, you will want to know how bankruptcy could affect it: 

  • If the refund is for taxes you paid in the year prior to your filing, it is generally yours to keep. 
  • If your refund is for taxes during the year you filed, you may have to surrender it. 

This means that January or February is a better time for filing, rather than waiting until the end of another year. 

How Your Tax Return Can Help During Your Filing

In addition to helping you eliminate debts, filing for bankruptcy through the U.S. Bankruptcy Court early in the year allows you to make the most of any tax refund you are likely to receive. This money can be used for the following: 

  • To pay any court fees associated with your bankruptcy case;
  • To pay for various living expenses, since you will no longer be able to rely on your credit cards;
  • To open a savings account, which is an important step in building financial security for the future.  

Let Our Michigan Bankruptcy Attorney Help You

At the Law Office of Karen E. Evangelista, P.C., we can help you get a fresh start in the new year by putting a stop to creditor harassment and eliminating unwanted debts. To discuss your options, contact our Rochester bankruptcy attorney and request a free, no-obligation consultation today.

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