Many people do not recognize that if a creditor takes legal action against you and gets a court decision, they can take your tax refunds and the money in your bank account, to name simply a few things. This does not seem reasonable– specifically when the financial institution is taking your child care or earned income credits. These are monies you need in order to pay rent, purchase food, repair your cars and truck or take care of health care requirements.
Can a creditor really take the money that will help pay for my rent and buy food?
Each state has certain “residential or commercial property” that is exempt (that is, creditors cannot go after them). Regrettably, Arizona does not shield child care credit or earned income credits. So, if a creditor has the capacity to access your bank account they can take your money and just leave you with just $300 to your name (unless your income is social safety and security or Veteran Affairs benefits– yet there are guidelines regulating exactly how to protect those funds).
Will filing bankruptcy save me from losing my tax refunds?
Unfortunately, there is a high probability of losing your tax refunds, assuming you utilize the Arizona exemptions in your bankruptcy. Those who work with bankruptcy attorneys at the onset of filing bankruptcy are aware of the repercussions, fully informed that they will lose their tax refunds and are, therefore, better prepared with alternatives to meet the family needs. Unfortunately, for those who opted to file bankruptcy on their own are not aware that they will lose their tax credits that will have been a big help on their finances. This will have been prevented if they worked with a bankruptcy lawyer in Arizona who may provide helpful legal advice when they needed it.
For many Americans, income tax refunds are the largest single chunk of money they receive all year. Imagine losing most or all of it to a debt collector or in a bankruptcy proceeding.
In most parts of the country, that is not something consumers need to worry about, but Arizona is among a dozen or so states that do not protect key tax-refund components for individuals, especially the earned income tax credit and the child tax credit. The legislation needs to be changed in order to protect all Arizona households.
Because of this law that has been a bane for the people of Arizona, some local bankruptcy attorneys have been motivated to get Arizona’s law changed. They are trying to convince Arizona legislators to protect or exempt the EITC (Earned Income Tax Credit) and child-tax credits from being relinquished as part of a bankruptcy or judgment.
Unless and until Arizona changes the law, the timing of a bankruptcy filing is critical. Some debt-strapped families might want to delay filing so that they could collect an upcoming tax refund in full.
Hiring a bankruptcy attorney to be fully aware of the bankruptcy proceedings can help.
If you or anyone you know is considering filing bankruptcy or need more information on how you can protect your tax credits, it is in your best interest to secure the services of a bankruptcy attorney in Arizona. One of the best bankruptcy attorneys in AZ that you can work with is at Phoenix Fresh Start. Call our office for free initial case consultation and let us help you rebuild your financial freedom.