Expert: Terry Leeders - 2/7/2008

Question
Hi.  I have a lot of credit card debt and no assets.  I have no money to pay on the debt and they are seeking to file judgments against me.  My husband and I will be filing a joint tax return for 07 and we have received refunds for the past few years also.  I have not worked since 2003 as I stay home with my kids.  Why do they need to see my tax returns if I file for bankruptcy?  Is it so they can get my refunds to pay on the debt or why?  Please help to explain if possible.  I live in NY.

Answer
Hi Andrea.

The bankruptcy reform laws from 2005 require debtors to tender paystubs and tax returns to the court (or trustee in most cases).  This is so they can verify your monthly income, and make sure your bankruptcy schedules are disclosing all income and information required to be scheduled.  Think of it as a checks and balances system.

Your refund is an asset.  You should disclose the estimated amount to your attorney.  Your attorney will then use state exemptions to protect as much of the refund as they can.  In Illinois, a joint filer has up to $8000 wildcard exemption to protect cash, household goods and tax refunds.   Most debtors that I see get to keep their refunds.  But check with your local attorney to be certain how much of your refund can be protected, as every state is different.  Good Luck.
Terry Leeders