Call for a free bankruptcy consultation

Louisville |


New Albany |

Schwartz Bankruptcy Law Center

5 ways to use your tax refund to pay down debts

Many people look forward to receiving an income tax refund because of the financial boost. If you are planning on filing for bankruptcy, you can use this extra money to augment your financial situation before the filing. Make sure you don't file for bankruptcy until you have your tax refund in your hand since the trustee will get the refund you file before you have it.

Before you pay any bill or spend your tax return on anything, make sure you understand how it might impact your filing. Consider these ideas for things you might do with the money:

  • Pay down past-due mortgage or vehicle payments if these are exempted assets in the chapter you are thinking of filing. Making this payment shows your lender that you want to take care of your debts, so they might be more likely to work with you to refinance, which may allow you to keep your home or vehicle.
  • Pay down your student loans. You typically aren't able to be discharge student loans in bankruptcy so getting caught up on them or even getting ahead on them can help to reduce your financial stress.
  • Buy food, clothing or other necessities. Many things that are considered necssities are exempt in bankruptcy, which means creditors can't take them when you file for bankruptcy. It's important, however, to avoid buying luxury items since things that fall under this classification aren't exempt and can be taken to be liquidated as part of your bankruptcy.
  • Pay for home or car repairs. These can help you to avoid expenses down the road, which can help to keep your finances on track while you are going through the bankruptcy process.
  • Pay other household expenses, such as insurance, rent or utilities. By paying these now, you can free up a bit of money in your budget. This may make it easier to cover your bills once you file for bankruptcy.

Though you may not be able to avoid bankruptcy altogether, by using your tax refund in any of the ways above, you may be able change your debt situation and qualify for a more favorable form of bankrptucy -- such as Chapter 13 -- or ensure your post bakruptcy life is less stressful financially.

No Comments

Leave a comment
Comment Information
Make A Payment Email Us For a Response

Need A Solution To Your Debt Problems?

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Make A Payment
Schwartz Bankruptcy Law Center

Office Locations:

Louisville Office
3339 Taylorsville Road
Louisville, KY 40205

Phone: 502-785-8549
Phone: 502-485-9200
Fax: 502-485-9220
Louisville Law Office Map

New Albany Office
501 State Street
New Albany, Indiana 47150

Phone: 502-785-8549
Phone: 812-945-9200
Fax: 502-485-9220
Map & Directions