When You File for Bankruptcy, Can You Keep Your Tax Refund and Your Car?
If you plan to file for Chapter 7 bankruptcy, you may have questions about what you get to keep, and what you need to give up. People tend to wonder about their cars and their tax refunds, in particular. This article looks at how filing for bankruptcy affects your ability to retain either asset.
Before you file for bankruptcy, you may wonder about what your life afterward will be like. There are two frequent questions that come up frequently: do you get to hold on to your tax refund, and do you get to retain your car. In most cases, the answer is, that you aren’t deprived of either. It can help to look deeper into these questions, however.
Filing for bankruptcy and keeping your tax refund
If you aren’t a homeowner, filing for bankruptcy isn’t likely to cost you your tax refund. You need to disclose in your bankruptcy filing what you expect to receive, but you will usually keep the money once it arrives. You need to volunteer information in your filing about what you anticipate, however, because a tax refund is considered an asset, and assets need to be disclosed.
If you’re a homeowner, filing for bankruptcy may require that you hand your tax refund money to your bankruptcy trustee. To know for certain how filing for bankruptcy affects your ability to retain control of your tax refund, it can help to consult a good bankruptcy attorney.
It’s important to remember, however, that there is a limit to how much of your tax refund you may keep. In California, the bankruptcy wildcard caps your retainable tax refund at about $28,000. For those who don’t own their own home, this cap is usually generous enough to cover most tax refunds.
Filing for bankruptcy and keeping your car
In most cases, anyone filing for Chapter 7 bankruptcy gets to retain control over their assets, including their car. It doesn’t matter if you own, lease, or finance the vehicle. If you need to make monthly payments on your car, however, you need to be up-to-date to be allowed to keep the vehicle.
In some cases, the lender may require you to sign a new reaffirmation agreement contract with the same terms as before. The reaffirmation agreement is sent to your bankruptcy lawyer, is studied by the court, and is considered for approval. The lender may maintain a retain-and-pay policy in which they let you keep your car as long as you stay current. Once approval takes place, your bankruptcy doesn’t relieve you of your obligation to repay your debt on the car. In some cases, however, lenders do not offer a retain-and-pay policy, and may repossess your vehicle even if you’ve been current with your payments.
If you lease your car, most leasing companies allow you to keep the vehicle as long as you make your lease payments on time. If you own your car outright, you may be allowed to retain it if the car is your most valuable asset, and if you don’t own a home, in addition.
You may be able to keep your car in bankruptcy even if you do own a home. The specifics of your case are likely to determine the outcome. It can help to speak to a lawyer specializing in bankruptcy law to know how to make the best of your situation.