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Tax time is also bankruptcy time?

Bankruptcy Lawyer Bryan W. Stone answers the question: “Can I keep my car if I file bankruptcy?”

 

Though no one enjoys the process of filing tax returns, the good news for many is that tax time usually involves a tax refund, providing a nice chunk of change that can be used for other things. For some, this means taking money and splurging on a treat or a vacation. For others, it means paying bills. For another group, it means taking the money and using it to pay bankruptcy fees, escaping debt that has proven too big to maneuver.

 

Tax-Sign-Charlotte-Bankruptcy-Lawyer-300x225Those in the bankruptcy world have long been aware of the increase in activity at the beginning of the year. Experts recently quantified the increase, proving that tax time leads to a substantial increase in bankruptcy filings. Filings of Chapter 7 bankruptcy, the most common form for individuals seeking financial relief, jump between 26 and 34 percent in March when compared to the average month and are up between 15 and 25 percent in April.

 

The reason for the increase is clear to many and has to do with the hefty tax returns many people receive this time of year. According to the IRS, the average tax refund in 2016 was more than $2,800. For most people, this sudden injection of cash is what they’ve needed to finally tackle the debt burdens they’ve likely been unable to afford to deal with.

 

In this way, the tax refund works as a kind of emergency savings account for some people, a way that money is forcefully kept out of reach and then returned in a lump sum once a year. This prevents the money from being spent throughout the year and gives you a chance to make bigger outlays of cash than you normally could afford, including for some, on bankruptcy filing fees.

 

The sad fact is that bankruptcy isn’t cheap. Though it seems counterintuitive given the dire financial straits that many filers find themselves in, getting out from under the debt takes some money. Filing fees and court costs can run hundreds of dollars and that doesn’t include attorney fees. When you add it all together, it’s quite common for a standard Chapter 7 bankruptcy to cost more than $1,000. This price has been rising, especially since 2005, when new regulations were passed to make the process more time consuming and thus more expensive. As the paperwork increases, so does the time it takes attorneys to prepare the filing. The result is more money spent by those least able to afford it.

 

The good news is that if you are interested in filing and are constrained by a lack of money, there are options to consider. First, some of the costs of bankruptcy can be waived by putting in a request to consider financial circumstances. Second, you can also try and work out a payment plan to spread the costs out over a longer period of time rather than one large payment up front. You can also reach out to friends and family to raise money through loans or gifts to pay the fees needed to escape the debt. Finally, if all else fails, you can do what many others do and wait for the tax refund to help.

 

If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.

 

Source:

http://www.denverpost.com/2017/04/02/tax-refund-bankruptcy/

 

 

Image Credit:

http://www.freeimages.com/photo/tax-1501475

 

 

See Our Related Video from our YouTube channel:

http://www.youtube.com/user/ArnoldSmithPLLC?feature=watch

 

 

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