You lose it, unless you spend it first.
Some states will give you an exemption to protect your tax refund monies. Utah is not one of them. In fact, in most states, you have to use it or lose it. If you’re unsure, call a bk attorney in your state and find out.
I’ve written a few articles on this, and the links are below.
Here, I will try to give you a quick and dirty list of the do’s and don’ts of spending your tax refund monies.
- pay off Mom and Dad before you file bk
- buy a new toy, like a dirtbike
- hide the money and claim that you spent it
- buy jewelry
- prepay rent
- buy food storage and clothing
- buy boring household appliances like washer/dryer/refrigerator/freezer/stove/sewing machine
- buy guns (really) (I can protect up to 3 of any value)
- pay for vehicle repairs and tires
- pay your attorney for your bankruptcy
Here are the old blog articles:
Spend it before you go bankrupt!
Utah has NO exemptions to protect your tax refund when you file bankruptcy. This means that if you go bankrupt before you receive and spend your tax refund, you will lose it. The chapter 7 trustee will take your refund and use it to pay your creditors. On the other hand, if you wait just a little bit to file and receive your refund, you can spend it all before filing bankruptcy.
Just remember to spend it on exempt items.
You can definitely use it to pay your bankruptcy attorney to prepare your case.
Don’t pay off friends or family! Call me if you have any questions on how to spend it. You can even text me on a Saturday at noon as you’re standing in an RC Willey trying to decide if you should purchase the new $800 bunk bed set for the twins (yes, you can). You can text me at 801-787-8860.
The list is below, but you’re always safe with food storage, clothing, washer, dryer, refrigerator, freezer, stove.
Here is a rehash of my post on this same issue last year (and the year before):
It’s that time of year again where I have to answer the phone and tell people that I don’t want their money until February or later because of tax refund season. It makes a lean December/January in our household, but it’s the only way to protect my clients.
(I am cutting and pasting from earlier posts, so please forgive the repeat information).
So let’s say you get your refund February 1, 2016. What do you do?
Better said, what don’t you do:
1. Don’t go buy a new toy like a dirt bike or a tv.
2. Don’t pay off any friends or family. This is a preferential transfer, to an insider no less, and it results in Mom and Dad being sued by the trustee.
So what do you do:
1. Spend it on exempt items under Utah Law. This basically means food, clothing, washer, dryer, fridge, freezer, stove.
(Did you see a computer on the list? No. Don’t ask me if that’s okay. It’s not).
2. And use the rest to pay me.
So let’s say you spend the tax refund on food storage March 1st and keep all of your receipts. When can you file? March 2nd.
Here is a relevant portion of the
An individual is entitlted to an exemption in …
(viii) (A) one:
(I) clothes washer and dryer;
(V) microwave oven; and
(VI) sewing machine;
(B) all carpets in use;
(C) provisions sufficient for 12 months actually provided for individual or family use;
(D) all wearing apparel of every individual and dependent, not including jewelry or furs; and
(E) all beds and bedding for every individual or dependent;
There are other items you can spend the money on, and this is by no means comprehensive, but this should give you a good idea on how to spend it. If you have questions on what to use it for, ask your attorney; that’s what he’s there for.