Expert: Terry Leeders - 2/10/2008

Question
My step-daughter is about ready to file bankruptcy. For 2006, we have the option of claiming her (we'd get refund; she's 24; half year in college, half year working)or letting her claim herself (bigger refund). The refund will repay us for giving her the money for the banruptcy fee. Is either option more advisable? Is the refund at risk at either way? Does our claiming her effect the banruptcy in any way?

Answer
Hi Steve.
You need to be careful here.  Speak with her attorney and your tax preparer.  Are you asking about 2006? or 2007?
Any tax refund you get, won't affect her case.   Any refund she gets could be an asset in her case, and subject to liquidation if her attorney cannot protect it.   She shouldn't give you any $ or payback debt to you before filing.  This would need to be disclosed in her case, and the trustee could possibly go after the funds from you to pay back into her bankruptcy estate.  Talk with her lawyer on how best to work out the taxes here.