By Cynthia Podis
Clients in my office ask this question every day! The answer is it depends on the amount of your refund and other assets. The Bankruptcy Code allows you to keep some personal assets in a Chapter 7 by referring to your state law or in some special cases, the Federal Exemptions. The Tennessee Code Annotated, as referred to by 11 USC §522 under the Bankruptcy Code, allows you to keep up to $10,000 in personal property including: furniture, electronics, cars (equity or paid in full), and cash (in the bank or income tax refunds). You must be a Tennessee resident to claim the Tennessee exemptions. This is a complex area of the Bankruptcy Code. I encourage you to hire an experienced Bankruptcy Attorney to guide you through the protection of your assets! It is sad when I see bankruptcy filers lose assets that may have been protected with competent help from their attorney.
To determine whether you can use the Tennessee Exemptions, Federal Exemptions or your prior state of residence, your lawyer will ask you specific questions concerning where you have lived over the past 3 years. The Federal Exemption allows you to use “…any property, not to exceed in value $800 plus up to $7,500 of any unused amount of the exemption provided under paragraph (1) of this subsection.”https://www.law.cornell.edu/uscode/text/11/522 You must not be a Tennessee resident to use the Federal Exemptions.
It is important to discuss your prior residences and the values of your personal items to determine if you can keep your tax refund. It is important to hold on to your Income Tax Refund to protect it. The protection of Exemptions apply only when you have possession of the money. The Trustee in your Chapter 7 Bankruptcy can take the money back from individuals or creditors if you spend it before your Trustee waives any interest in it. They will generally allow you to use the money to file your bankruptcy, pay the filing fee to the Bankruptcy Court Clerk, and to pay basic living expenses like rent, electric and water bills. Any extraneous expenses like paying back a family member or other insider can be subject to scrutiny by the Chapter 7 Trustee.
When a Chapter 7 Bankruptcy will not protect all your assets, you may want to consider a Chapter 13 Bankruptcy. Chapter 13 is a repayment plan that protects your assets that may not be completely protected in Chapter 7 by paying unsecured creditors over time the amount of the unprotected asset (this is called the Best Interest of the Creditors Test).
For more information visit www.BankruptcyNashville.com or call 615-399-3800 and schedule a free appointment with us!
Podis and Podis, 102 Woodmont Blvd Suite 200, Nashville TN 37205
This information is not legal advice, it is an advertisement for legal services.
We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code