Indianapolis Bankruptcy Lawyer Wants To Slow Rapid Refunds

Fast food may be relatively cheap, but rapid tax refunds - they're a whole different story..

Around this time each year, I and the Columbus bankruptcy lawyers who work in my office there start getting the questions about tax refunds.

Should I get a rapid refund before I declare bankruptcy?
Will the bankruptcy court take away my tax refund?

To give readers useful Indiana bankruptcy information, I first need to make sure everybody understands the difference between getting a tax refund and getting a so-called "rapid tax refund". One of the traps I want people to avoid - especially those people considering bankruptcy who can hardly afford to lose more money - is tax refund scams.

Now, don't get me wrong - absolutely nothing wrong with a legitimate tax refund. (Financial planners would tell you it's better to change your withholding throughout the year, so Uncle Sam isn't holding on to your money until refund time.)

But, as a good bankruptcy attorney in Indiana, besides my work as a debt consolidation lawyer, I need to emphasize that it's better to file your taxes as early as you can, and then wait the six weeks to get the refund. Here's why:

You're paying a fee (usually $150-200) up front, which is taken out of your tax refund before you ever get that money.
What's more, the refund you get "early" isn't really the tax refund - it's a loan from the rapid refund company to whom you've signed away the right to collect the real refund money when it arrives.
If you're given a debit card as part of the transaction, and you use that card to withdraw money from an ATM machine, you're charged transaction fees each time you do that.
There are often additional ATM fees for asking for the balance on your card or for talking to a customer service agent.

All in all, the only one who doesn't benefit from rapid refund arrangement is you! After years' experience offering payday loan debt help, I think rapid refund offers are no better than those payday loans.

Back to the question of the timing of a tax refund when it comes to filing bankruptcy.

File for a tax refund today, then file bankruptcy - the court will probably take the refund to use towards paying your creditors. The best strategy would be this:

Step One: File your taxes.
Step Two: Wait to receive your tax refund.
Step Three: Spend the tax refund money PROPERLY.
Step Four: File bankruptcy

Part of what I do in helping people prepare for bankruptcy is to work to help them keep as many assets as possible within the bankruptcy law. Since, under current law, debtors are allowed to keep $300 in cash, you don't want to have the tax refund money in your hands. On the other hand, if you spend the money on luxuries, the court will not look favorably on your bankruptcy petition. Make a mortgage payment, catch up on other bills, have some necessary dental work completed.

There's one step in the process that needs to come even before Step One: If you're considering filing bankruptcy, the earlier you talk with a board-certified consumer bankruptcy specialist, the more options will be open to you. Bankruptcy in Indiana is one area where getting proper advice on all the "little things" could make a very big difference in the outcome!