Milwaukee, WI Bankruptcy Law Blog

Saturday, May 27, 2017

Using Your Tax Refund To File For Bankruptcy

Have you gotten your tax refund yet? It’s both exciting and frustrating when that money comes in. It’s exciting for the obvious reason: yay money! But it’s frustrating because that is money that you could have been using instead of loaning to the government.

For many people, that money comes in too late to be used to catch-up on missed payments or get things back on track, so they are using it to pay for a bankruptcy. A recent USA Today story about this got a lot of attention, but those of us in the bankruptcy community were surprised everyone didn’t already know about this.

In the Milwaukee area, we see a surge of individuals and families looking to file Chapter 7 bankruptcy, the type of bankruptcy that wipes out most debts, this time of year. Most of them are using their tax refund as a way to pay for bankruptcy.

Many of the people who pay for their bankruptcy with their tax refund wanted to file sooner, but did not have the money they needed to do so. Because tax refund money comes in one large chunk, it is easier to put it aside and use it to file for bankruptcy than it is to save up a little bit each month, especially when finances are tight.

How Much Does Filing For Bankruptcy Cost?

Another reason using a tax refund to file for bankruptcy is so popular is because the average refund covers the full cost of the average bankruptcy filing.

According to the USA Today article, the average tax refund in 2016 was $2,860. The average Chapter 7 bankruptcy costs somewhere around $1500 to $2500, which includes the filing fees that are charged by the court and attorney fees.

Keep in mind these numbers are just statistics. It is impossible to know exactly how much filing for bankruptcy will cost any particular person without knowing more about that person’s particular financial situation. Generally the more debt involved, the more complicated and expensive the case is to resolve.

Wait Until Next Year?

If you are reading this, and thinking that it is too late for you to file for bankruptcy this year because you already spent your refund, don’t freak out. You don’t need to wait a whole year before filing. Make an appointment to talk with a bankruptcy attorney and explain your situation.

An experienced attorney we be able to go over your options with you, and help you make a plan for how to best move forward. It might turn out that filing for bankruptcy is not the best option, or that filing under a different chapter than you had anticipated will work out better.

Most attorneys also offer installment payment plans, so don’t let an inability to front the full cost of a bankruptcy right now be the barrier that keeps you from securing your financial future.

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933 North Mayfair Road, Suite 107, Milwaukee, WI 53226
| Phone: 414-436-8428