Any property that a debtor owns or is entitled to at the time of filing bankruptcy becomes property of the debtor's bankruptcy estate and is administered by the bankruptcy trustee. This includes all monies that a debtor is owed or entitled to as of the date of the bankruptcy filing, such as unpaid tax refunds. Unlike many other states, Arizona does not have an exemption that would preclude a trustee from taking a debtor’s tax refund. It is important to confer with an Arizona bankruptcy lawyer prior to filing bankruptcy. Bankruptcy lawyers are starting to lobby the Arizona legislature to enact a "wildcard" exemption statute to protect all or part of a tax refund.
Only that portion of a tax refund attributable to a debtor’s wages accrued prior to filing bankruptcy must be surrendered to the trustee. Such amount depends on the debtor's filing date. For example, if a debtor filed bankruptcy in 2011 before receiving a tax refund for 2010, the entire refund would become part of debtor’s bankruptcy estate. It constitutes unpaid money that the debtor was entitled to as of the bankruptcy filing date. Even that portion of a debtor’s 2011 tax refund attributable to the debtor’s accrued wages prior to filing is part of the bankruptcy estate. For example, if a debtor files bankruptcy on June 30, 2011, the debtor is technically entitled to approximately 50% of the 2011 tax refund as of such date because six out of twelve months would have lapsed prior to the date of filing. As a result, the trustee would collect 50% of the 2011 tax refund once the debtor receives it in 2012. If the debtor filed bankruptcy towards the end of 2011, the trustee would be entitled to receive much more.
If a debtor expects to receive a substantial tax refund next year, the debtor may want to delay bankruptcy until after receiving and spending it on reasonable expenses. Not surprisingly, many debtors rely on their tax refund to pay their legal fees to an Arizona bankruptcy attorney. However, a bankruptcy delay may be unfeasible if an immediate filing is necessary to stop a pending foreclosure, repossession, garnishment or lawsuit. It is incumbent on all potential debtors to consult with a competent Arizona bankruptcy lawyer to determine the appropriate time to file bankruptcy.
Scott W. Hyder is a seasoned lawyer specializing in Arizona bankruptcy law, foreclosure law, real estate law, trust & estate law and contracts. Contact Scott at 602.923.7370 or visit his website at:
http://scotthyderlaw.com.
About Lawyer Central:
Lawyer Central Network is a nationwide network of attorneys using technology to increase their individual exposure. Lawyer Central is emerging as a leading public relations and mixed media marketing organization for fast-growing law firms and forward-thinking attorneys. Lawyer Central membership includes access to cutting edge technology, as well as various types of media exposure ranging from practice area videos and in depth interviews to complete public relations and internet relations management.
