In Arizona, when you file a Chapter 7 bankruptcy, you could lose certain property or interests you own that are non-exempt. Exemptions, or things you can keep, are set primarily by Arizona Statute (A.R.S. §§33-1123 to 1126). One item that Arizona does not exempt is any tax refund that you are owed at the time of filing. For most people, this means that they will have to turn over one year’s tax refunds, both state and federal, to the Trustee. How much of the refund you could lose depends almost entirely on the date on which you file. This is because you are required to turn over the last 12 months of tax refunds to the estate. However, if you have already received your refund and spent it appropriately (see Bankruptcy Planning), you likely would owe the Trustee nothing upon filing your Chapter 7 Bankruptcy. If, on the other hand, you file bankruptcy at the end of the year, the Trustee would be entitled to your entire tax refund for that year. Finally, if you file in the middle of the year, the Trustee would be entitled to approximately half of your refund.
Planning for Bankruptcy
The best way to avoid the many potential pitfalls of filing bankruptcy is to speak with an experienced Arizona Chapter 7 bankruptcy attorney. An experienced attorney has seen situations similar to yours and can help you prepare for your filing so you can get a fresh start. The Law Office of Phil Hineman offers free consultations, so if you have any questions, feel free to fill out the contact form and we’ll make sure you get answers.