Can I spend my tax refund on prepaid VISA gift cards to hide the money from the bankruptcy trustee?

No, that’s fraud!

This time of year I have a large number of potential clients who are waiting on their tax refunds.   If they file bankruptcy before they receive and spend the refund, then they will lose that refund money to the bankruptcy trustee.  If they delay filing the bankruptcy for a few weeks, they can receive the refund and spend it on exempt (protected items).    

I’ve written enough blog articles on how to spend you tax refund before bankruptcy, so I won’t go over that again.

However, I need to warn you:  Do not try to trick the trustee.  The bankruptcy trustee has handled tens of thousands of bankruptcy cases.  There is nothing you can think of that he/she hasn’t already seen.

I had a client ask me if they could spend their refund on prepaid gift cards.  The answer is a resounding, “No!”  Those gift cards are the same as cash, and if you try to squirrel away cash before filing bankruptcy, that is fraud.  When the bk trustee discovers it, your case will be thrown out, your discharge revoked, and you’ll get sued.

Just play by the rules and you’ll be fine.