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Keeping a Tax Return in Chapter 7

Michael Agruss

Written and Reviewed by Michael Agruss

  • Managing Partner and Personal Injury Lawyer at Mike Agruss Law.
  • Over 20 years of experience in Personal Injury.
  • Over 8000+ consumer rights cases settled.
  • Graduated from the University of Illinois Chicago School of Law: Juris Doctor, 2004.

If you are considering filing for Chapter 7 bankruptcy in Illinois, you may be wondering whether your tax return will be subject to garnishment. While this usually depends on the timing of your filing (relevant to your financial situation) and the receipt of the refund, there are also certain steps which can be taken to keep a tax return.There are three general options for Illinois residents to keep the majority of a tax return when filing for Chapter 7. If you receive the return before you file, you may spend the money on “approved expenses” (clothing, food, medical expenses, mortgage/rent payments, education, utilities, and auto maintenance) to avoid losing it to the trustee in your case. Clients can also reduce their refund to a minimal amount by adjusting their withholdings or include the refund in their Chapter 7 exemptions. One way to do this is to use Illinois’s “wildcard exemption” which protects up to $4,000 of your property, tax refunds included; if you use the wildcard exemption and your refund exceeds $4,000, however, the non-exempt portion may still be pursued for the benefit of the creditors in your case.If you are struggling financially and considering filing for Chapter 7 bankruptcy, you’re not alone. Contact an experienced bankruptcy attorney today for a free consultation.

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