|Katherine:||Hello everyone and thank you so much. We’re being joined by our attorney friend Ron Drescher and he’s going to talk with us about how to keep your tax refund if you’re in bankruptcy or while you’re in bankruptcy. Ron, welcome back to this needs to be said. How are you?|
|Ron Drescher:||I’m doing great. How are you doing?|
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|Katherine:||I’m doing wonderful and this is a great topic, great time of year to have this topic because people always have questions and this is one I haven’t personally had someone ask me yet. But since we were right here on the platform people are going to be like oh, I didn’t know because they may have not wanted to tell me about the big bad “B” word anyway. Even though we know it’s not a bad word. You’ve been teaching us here that it’s really a great way to help us get back on the right track. During this time of the year, beginning of the year people looking at filing taxes and getting ready for those things. Talk to us about how these two could possibly go together. Tax refund and bankruptcy.|
|Ron Drescher:||Well, all right. A tax refund represents income that you’ve earned during the course of the year that you loaned to the IRS and they are going to pay you back after you file your tax return. That is an asset of yours. Even if you haven’t received it yet, even if you haven’t prepared your tax return, it’s an asset that you have that would need to be disclosed on your schedule of assets if you were to file bankruptcy. Every state has a limit as to how much of your assets you are allowed to keep when you file bankruptcy. It’s different in every state, this is not a uniform federal standard. The federal bankruptcy code has a list of the assets you’re allowed to keep and the dollar amounts but it allows the states to opt out of that list and prepare their own. Almost every state does prepare their own. Your bound by what the state allows you to keep. I’m most familiar with Maryland. That’s where I do most of my work. Maryland allows you to keep 12 thousand dollars’ worth of your stuff that’s not your primary residence. There’s a legal term for it. The legal term is not your stuff, although to me that’s the most meaningful thing.
The legal term is your exemptions. The exemptions are the amount of money or property or assets or stuff that you’re allowed to keep even though you’re not paying your creditors in full. In Maryland you’re allowed to keep 23 thousand dollars’ worth of the equity in your home. You’re allowed to keep a thousand dollars’ worth of anything that you’d find in your house. Then you’re allowed to keep about 11 thousand dollars of almost anything else and there’s some refinements in there. Usually we’re talking about that 11 thousand dollars that’s discretionary for people in bankruptcy to keep. Baring that now let’s go back to the tax refund. You’re going to get this tax refund and you have other things. Maybe you’ve got a wedding ring, maybe you’ve got money sitting in a bank account, maybe you’ve got a car that’s paid off. These are all assets that a trusty in bankruptcy are going to look at in deciding whether or not you have assets that can be sold to pay creditors. That’s the trustees function. That trustee is not out to hurt you. The trustee is not our to make sure that you don’t get your bankruptcy. The trustee is only looking to see if you’ve got assets that can be used to pay your creditors even if it’s as little as a penny on the dollar. That’s the trustees role.
The trustee loves tax refunds because it’s cash. It’s easy cash that he’s going to be able to grab as soon as you file your tax return. Your first move if you know you’re going to be filing bankruptcy is to look at all of your assets, sit down with your lawyer, look at your assets and say okay what tax refund am I expecting to get back? How much is that going to be? How much are the other assets I have? Are those going to fit into the exemption limit that I have? Then you can decide … you have to decide then am I going to file bankruptcy now or am I going to wait until after I get my refund and then file the bankruptcy. It depends because if you’re going to have a refund that’s going to put you over that exemption limit we call that an asset case or an over exempt case because your over what’s exempt. Then you ought to wait to file your bankruptcy case because that way you can collect your cash, spend it down on certain things, and we can talk about that. That’s probably a subject for a different interview.
You can spend it down on things until you know that your assets are within the exemption limit in your state. Then you file bankruptcy, you get to keep all your assets. On the other hand, if you say I’ve got three thousand dollars value in my car and I’ve got stuff in my house which is never worth as much as people think it is. I’ve got some cash in the bank and cash in a savings account and I’m going to get four thousand dollars back from my tax refund and that’s all less than the total amount of exemptions I’m allowed to keep under my state law, then still go ahead and file the bankruptcy now and then you’ll be fine when your tax refund actually comes in.
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|Katherine:||You’re saying that I’m making payment arrangements? I have the trustee and the trustee is negotiating for me so I have a payment arrangement established to repay my creditors. Am I understanding that correctly?|
|Ron Drescher:||No. No. No. You actually want to avoid a payment arrangement when you file the tax. The perfect case, and this is a chapter seven case, the perfect case is you file your bankruptcy, you have less equity in your assets than the amount of exempt property you’re allowed to keep. If that’s the case, the trustee will say well then there’s nothing here for me to liquidate to pay creditors. He closes your case as what’s called a no asset case. That’s what you want to do. You need to know your numbers before you pull the trigger on the bankruptcy. Once you pull the trigger you can’t go back and you can’t really fix it. What I’m here doing is I’m endorsing and urging your listeners to really scratch their heads and think well I better get help and figure out what my options are before I file the bankruptcy so that I can plan it accordingly so I can keep the maximum amounts of assets that I can legally. You’ll notice I’m not saying you should time when to file the return. I think you should always file the return pretty much as soon as you can because even if you haven’t filed the return, the mere fact that you might be due a refund when you do file a return is enough of an asset that it has to be listed in your bankruptcy papers and the chapters.
Every trustee will just hold your case open until you file the tax return. There’s no play in timing the filing of the tax return but there’s a lot of play in timing the filing of the bankruptcy case.
|Katherine:||They would definitely need to talk with someone like you. What I’ve learned over the years I’ve been in business, I’ve heard people say let the experts do it and the first thing that comes into people’s minds is oh no it’s going to cost me a lot of money. I’m not going to be able to afford to do it. The thing is you can’t afford not to do it. I’ve learned more times than not the hard way is the more expensive for me to try to do these things on my own anything. And I’m not talking about filing bankruptcy. I don’t even think that’s something that you can do on your own but trying to piece it together online and read, maybe you watched some YouTube. Don’t do it. I’m just telling you don’t do any of that. Let someone who knows this whole system, let them help you and then you’ll find out if you … like he said, we value things sometimes in our house more than what they are. You may think you need to be in bankruptcy and you may not be. The attorneys that I bring onto, this needs to be said, are here to deal with you with integrity and they’re here to educate you.
Ron has been on with us before several times and his mission is to help you better understand what your options are. Don’t get yourself all into a jam if you don’t have to. Right Ron?
|Ron Drescher:||Yes. Absolutely. Absolutely.|
|Katherine:||This has been really good as usual. I know people are relieved at hearing they can keep that refund because a lot of times people are catching up things. They may not really be consciously thinking if they’re loaning the money to the government but they’re saying there’s a repair at the house I need to get fixed. They just want to get caught up on something. They want to fix something. They want to get a new vehicle, whatever, something more reliable. They’re nervous. If I’m filing bankruptcy or if I’m in bankruptcy like what do I do? Can I do anything? Being able to get in touch with someone like yourself can give them a better idea of their particular situation because we’re speaking in big broad strokes here but your individual situation will change things and Ron can guide you on that. Ron did you have more that you want to share before you gave them your information on how to contact you?|
|Ron Drescher:||Yes. Absolutely. It’s pretty standard in my industry that you’re going to get about a half an hour consult with a bankruptcy lawyer and they’ll waive the fee. You get to sit in front of a lawyer without paying. Tell them your story and the lawyer will diagnose what’s going on with you and give you the best course of action. It’s kind of remarkable that you get that kind of value for nothing. I think a lot of people don’t realize that. That’s one of the reasons why they’re afraid to see the bankruptcy lawyer. I’m always amazed when people say, well you know what? I’m going to do this thing and then I’ll talk to the lawyer to get my options. It’s remarkable. Why would you do that? Especially with a first half hour you’re not- … I’ll never figure out why people make that decision when it’s kind of critically important.|
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|Katherine:||You’ve heard it from Ron, our attorney Ron Drescher. He’s talking with us today about how to keep your tax refund in bankruptcy. Ron tell people how they can get in touch with you outside of what needs to be said.|
|Ron Drescher:||You could always call our office at 410-484-9000. You can always visit us online at drecsherlaw.com. D-R-E-S-C-H-E-R-L-A-W .com. Or you can send me an email. Ron Drescher at R-O-N-D-R-E-S-C-H-E-R at Drescherlaw.com email@example.com Love to talk to you.|
|Katherine:||Awesome. Until next time Ron, have a wonderful day. Thank you so much.|
|Ron Drescher:||Well great. Thank you very much for having me.|