This is always a tough call.

It’s November, and if a client files bankruptcy this month, he will lose 11/12 of his tax refund next February.  If he files between December and the time he files his taxes next year, he’ll lose the whole refund.

I was on the phone with a woman yesterday who is being garnished $300 a month from her paychecks.  She wants to file bk right away to stop the garnishment.  However, she is getting at least $2,800 from the EIC next Spring when she files her taxes.  We ran through the numbers:  she can lose the $2,800 refund and file bk today, or she can suck it up and get garnished about 2.5-3 more months for $900 total.  She decided to wait.  $2,800 is bigger than $900.  

Tax refund season is often the only time of year that people get a little extra money to do the nice things like dental work or those nagging vehicle repairs.  Sometimes you have to file bankruptcy now, but it may be worth waiting if you’re looking at a larger tax refund.

I have covered this topic over and over, and here are some links for further research: