It’s almost tax time again. This would be a good time to discuss the issues involved with your tax refund and bankruptcy. How does your tax refund effect your bankruptcy case?

As I have said before, if you are filing a Chapter 7 bankruptcy, the trustee will receive your latest tax return. If you are expecting a large tax refund it would be wise to include that in your report to the bankruptcy court. Otherwise, the trustee will conclude that you have more discretionary income than you have disclosed. In a Chapter 7 case you must demonstrate that your monthly living expenses exceed your monthly net income. Thus if you receive a tax refund of $3,600, you will need to show that your monthly expenses are greater than your monthly income by more than $300 a month.

It is important to keep in mind when you claim your tax exemptions that if you withhold more in order to receive a large refund at the end of the year you are short changing yourself every month. If you live paycheck to paycheck the extra money—as in the abovementioned instance three hundred dollars a month—can make a considerable difference and keep you from ending up in greater debt with finance charges to pay. Adjust your withholding using a W-4 form according to your needs.

If you live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, or Golden, Colorado, and have any questions contact me: Kevin D. Heupel, Colorado bankruptcy attorney, 303-955-7570, COBankruptcyHelpEmail, or free-consultation form.