If you plan on filing bankruptcy after January 1 of next year or of any year, you need to speak with your lawyer regarding whether your income tax refund can be protected. If you overpaid your taxes and are due a refund, that refund becomes your property on January 1, even if you have not yet filed your return.
If you file your bankruptcy after January 1, that income tax refund needs to be declared as an asset.
Often, income tax refunds can be protected by applying an “exemption.” Georgia has a fairly stingy exemption law, so if your refund totals more than $500 or $600, you should seek advice from your lawyer about whether your refund can be protected, and, if not, whether you should file your return, obtain your refund and use the money without putting yourself at risk.
Going forward, I usually encourage my clients to review their withholding numbers so as to avoid ending up with a large refund. If you are getting a tax refund, that means you are giving the government an interest free loan. In addition, if your refund is in the $4,000 to $5,000 range, the Chapter 7 trustee will take the position that you are using it as a kind of savings account and the trustee might object to your case on the grounds that you have unrevealed “disposable income.”
In Chapter 13, the Atlanta trustees generally require a provision that directs the IRS to send all tax refunds to the trustee, so there is no advantage in setting your withholdings to create a large tax refund.
Bottom line: tax refunds can create bankruptcy issues, and the more time you have to plan how to deal with your refund, the better.
Filed under Protected property issues by 
It appears the Georgia Legislature is seeking to cap real estate tax re-assessment increases at 3% per year. According to the Atlanta Business Chronicle, Republican lawmakers pre-filed legislation to this effect with Georgia House of Representatives on Monday November 17, 2008. The measure, if approved would actually amend Georgia’s constitution. If the proposed constitutional amendment is approved by two-thirds of the legislature then it will be submitted to Georgia voters in the next general election held in an even year.
This could help consumers gain more control of their own annual budgets–especially those who are making Chapter 13 monthly plan payments. In Chapter 13 plans, the Trustee expects the Debtor to continue to make current and timely payments on secured debts like their homes and automobiles. Unexpectedly large increases in property taxes could hinder successful completion of these plans.
At a time when large automobile manufacturers, like General Motors, face the real possibility of Chapter 11 bankruptcy, Georgia consumers need all of the assistance they can get.
The Winter Legislative session begins January 12, 2009. I encourage everyone to contact his/her local representative to support this measure capping the percentage increases to real estate assessments.
Filed under Bankruptcy budgets by
The headlines about the economy are grim and seem to repeat the same refrain — the Dow Jones, the NASDAQ and the S&P 500 seem to hit new lows every day. Recent drops have been driven by concerns about the struggling auto industry.
Executives from the big three American Automakers flew in their private jets (trips that cost the struggling companies around $20,000 per round trip) to Washington D.C. to testify before Congress and make their collective case about their companies’ needs for a governmental financial bailout. When asked if they had considered bankruptcy, at least one executive responded that bankruptcy was not a viable option for his company. Is this really true? Sometimes Bankruptcy is the best option for both consumers and businesses that need time to regroup, reassess and restart.
In the case of Ford, GM and Chrysler, a Chapter 11 bankruptcy might allow the auto manufacturer to modify union contracts that were negotiated years ago in a different economic climate. Those who wish to see the automakers take advantage of the bankruptcy laws argue that “legacy” costs, which include health care benefits to retirees and their families and generous retirement benefits add thousands of dollars to the manufacturer’s cost of a car as compared to similar models made by Japanese or Korean companies.
Union members and their supporters in Congress will obviously balk at losing benefits, but you can be sure that there will be strings attached to any bailout, if a bailout does indeed occur.
It appears thatthe debate about the reasons behind the auto manufacturers’ troubles will not yield to any consensus. What do you think? If you are a struggling homeowner trying to save your family’s home, nobody is rushing to bail you out, and your options in bankruptcy are limited. What should the U.S. Congress do and should the automakers consider bankruptcy?
Filed under General consumer bankruptcy info by
