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Tax-refund season is here and so are bankruptcies

Tax refunds are usually looked at with great joy; people who receive them make all kinds of plans for what they'll buy or how they'll save. For some, though, a tax return is a new lease on their financial future. It could mean going into bankruptcy.

If you didn't know, bankruptcy is not inexpensive. In fact, you have to have the money to file, even if you have to pay it over time, to be able to seek a bankruptcy. For people who truly have no funds to spare, a tax return means that they can finally take the step toward a better financial future. Filing and fees cost around $335 and fees from attorneys range. On average, people pay around $1,500 to discharge their debts in a Chapter 7 bankruptcy.

While $1,500 isn't a large amount of money in the major scheme of things, for those struggling with their finances it can seem like a pipe dream to have it all at one time. That's what makes tax season such a relief for those individuals.

A refund can also help individuals catch up on their bills. For example, if you get back $1,000, that could be enough to pay off a large purchase on a credit card or to pay off repairs on your vehicle. For others, that money is better spent obtaining a bankruptcy. It makes sense if your debts are over 50 percent of your annual income and include unsecured debts. If you don't see a way to pay off your debt within the next five years, this could be an option that helps you, too. Your attorney can help you look into the options available, so you know what your choices are.

Source: ABC News 7, "When a tax refund means bankruptcy," Sean Pyles, March 30, 2017

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