O'Bryan Law Offices O'Bryan Law Offices
Call now for a FREE consultation!
502-400-4020
Office Locations

Three Bad Ideas For Your Tax Refund

Three Bad Ideas For Your Tax Refund

This time of year millions of Americans receive healthy income tax refunds. This money is often welcomed relief for families struggling to make ends meet. Unfortunately, the refund is sometimes not enough and bankruptcy relief is needed for a long term debt solution.

If you need your income tax refund to help manage your family finances, but also need a permanent solution from the federal bankruptcy laws, read on for three bad ideas for using your tax refund. These are definitely activities to avoid!

Bad Idea 1: repaying a loan to a friend, business partner, or family member. A person in a financial bind will often turn to someone close for help. The bankruptcy law labels friends and family as "insiders" - people with whom you have a personal or financial relationship. Repaying a debt to an insider creditor can be avoided for up to one year prior to your bankruptcy filing. This means that the bankruptcy trustee can force the turnover of the money and divide it equally among your unsecured creditors.

Bad Idea 2: paying off a car loan. The law allows you to exempt and keep equity in your vehicle during bankruptcy. However, there are limits. By paying off your car loan, you may create a surplus of equity beyond what you can protect. That means that the trustee could force you to sell the car and take the excess equity.

Bad Idea 3: paying a collection agency. Tax season is the collection agent's Christmas, birthday, and Halloween all rolled into one. The collector harasses and pressures the debtor into paying from their tax refund in exchange for peace of mind. There are several reasons paying a collection agency before bankruptcy is a bad idea.

* First, if you are filing bankruptcy, the collection agency will likely be discharged. You are throwing your money away.

* Second, payments to a creditor that are made while you are insolvent can be avoided by the trustee. That means that the collection agency may not get to keep the money.

* Finally, if you need to stop the collection agency's harassment, hire a bankruptcy attorney! The Fair Debt Collections Practices Act makes it unlawful for a collection agency to contact you personally (by phone, letter, in person, or by email) once you are represented by an attorney.

The best advice is to speak to an attorney before spending your income tax refund. Your attorney will tell you whether you are able to keep the money, or discuss strategies to spend it wisely.

No Comments

Leave a comment
Comment Information
EMAIL US FOR A RESPONSE

Free Case Evaluation

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Let’s get started today!

Call 520-400-4020 to schedule your free consultation!

Attorney Group Photo
Five Convenient Locations

Main Office:

Louisville Office
1717 Alliant Avenue
Suite 17
Louisville, KY 40299

Louisville Law Office Map

Frankfort Office
307 Wilkinson Street
Frankfort, KY 40601

Map & Directions

Louisville Office
2908 Taylorsville Rd.
Louisville, KY 40205

Map & Directions

Louisville Office
9311 Preston Highway
Louisville, KY 40229

Map & Directions

New Albany Office
515 Pearl Street
New Albany, IN 47150

Map & Directions

  • Main Office

    Main Office:

  • Bowman Field

    Bowman Field:

  • Okolona

    Okolona:

  • Frankfort

    Frankfort:

  • New Albany

    New Albany: