February 18, 2020

Should I Wait to File Bankruptcy Until After I Receive My Tax Refund?

This article is posted in a strange part of the year (August), but this question comes up usually starting around October:  “Should I wait to file bankruptcy until after I receive my tax refund?” Or a variation of this question: “If I file bankruptcy right now, will I lose a portion of my 2014 tax refund?”  Often times, people will ask these questions of a bankruptcy lawyer because they may have heard about someone who lost all or a portion of a tax refund as part of the bankruptcy process. These are both legitimate questions, and questions that were much more important before July 2013, the date when Federal exemptions (or laws that protect property) were introduced in Oregon for bankruptcy purposes.

Before Federal bankruptcy exemptions were introduced in 2013 in Oregon (bankruptcy exemptions are laws that protect property), losing a portion or all of a tax refund as part of the bankruptcy process was more prevalent. Before 2013, bankruptcy lawyers had few options when it came to bankruptcy exemption law, and most bankruptcy cases required the use of Oregon exemption law.  Under Oregon exemption law, a person could protect all of the Federal Earned Income Credit (EIC) refund and up to $400 of the remaining tax refund.  At that point in time, often it made sense to file bankruptcy after you received your tax refund and legitimately used it.   This is not the case anymore.

Under Federal exemptions, one can protect most, if not all, tax refunds, provided we apply the Federal wildcard exemption.  This exemption allows an individual to protect $1,225 plus up to $11,500 of unused Homestead exemption in any property.  Therefore, hypothetically, a married couple who file bankruptcy together, given the right circumstances, can easily protect a rather large tax refund.  This exemption can be used on other property as well, not just the tax refund.

With the advent of Federal exemptions in Oregon for bankruptcy purposes, concerns about protecting tax refunds through a bankruptcy are now much less of an issue than before. With few exceptions, most people are able to protect tax refunds when filing bankruptcy, despite the time of year in which they file a bankruptcy.

If you have questions regarding bankruptcy or assets that may be affected by a bankruptcy filing, please call today for your free bankruptcy consultation with a bankruptcy lawyer in Eugene.

I look forward to hearing from you.


Tom Butcher
Butcher Law Office, LLC
116 State Highway 99 N #101
Eugene, OR 97402
(541) 762-1967 telephone
(541) 762-1968 facsimile

Pursuant to 11 U.S. Code § 528: "I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code."

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