When someone makes the decision to file for bankruptcy, timing is everything. After the new year begins, many people have shopping remorse from their holiday spending spree and decide they need to file for bankruptcy for their New Year’s resolution. This happens almost every year after reality sets in and there just isn’t enough money to make ends meet. What these folks don’t realize is that tax season comes quickly after the new year and those who rely on their tax return for pennies from the sky usually won’t think about it before filing for bankruptcy. That’s why it’s a good idea to cover all the bases and ask the question, can I lose my income tax refund and file for bankruptcy?

The simple answer to that question is yes. That is why it is important to have a bankruptcy attorney to help a person file for them. A bankruptcy attorney will know when to file to protect your tax refund if necessary. Any income becomes part of the bankruptcy estate when you file for bankruptcy. In fact, the trustee will generally look back six months and money received during this time will be considered income. Worse yet, a big fat government check that is not protected by bankruptcy exemption laws is fair game for the bankruptcy trustee to use to pay off creditors. By filing Chapter 7, the bankruptcy attorney will look at all cash, savings, and any other assets that can be easily liquidated and will protect those who use the bankruptcy exemption laws. Where there is a problem is when an individual does not think about an income tax refund that is on its way from the federal or state government and the bankruptcy trustee finds it. If the lawyer is not aware of it, he will most likely be left unprotected and gobbled up.

This is why it is really important to make sure that a person has an attorney that they trust and feel comfortable sharing intimate financial details. Holding back is not an option. Trying to hide a credit card or some side property will only end disastrously in a bankruptcy filing. In this highly technology-driven world, bankruptcy administrators have many tools in their bag of tricks to gain insight into the individual filing for bankruptcy. The last thing a person wants to hear at the 341 meeting is that the trustee found some property or income that was not disclosed. The lawyer will have an egg in his face as will the debtor and the digging will begin.

Just because someone is planning to get their tax money back doesn’t mean they shouldn’t file for bankruptcy if they absolutely have to. Most states allow generous exemptions to protect a good amount of property, including a wild card exemption that can be used for anything, including an income tax refund check. As the economy gets tougher, most people count on this annual rebate as a kind of crazy money or for the frugal, just a way to stay a little more comfortable for a few months. The amount of these checks in the next few years will likely decrease as the Affordable Care Act takes effect. It will cost every American more money to help pay for health care, leaving less to pay back at the end of the year. The bottom line is, if someone needs to file for bankruptcy, then file. They should talk to a bankruptcy attorney and be completely honest about any potential windfall they may have in the future so that the attorney can plan accordingly and even postpone filing the petition if necessary.