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.