You might want to think again about using tax refund to pay off debt.
The White House has promised that the IRS will process refunds despite the government shutdown, with the IRS recalling furloughed workers to process the returns. However, taxpayers are not in the clear yet. If you are thinking of using tax refund to pay off debt, you may need to think again. There are any number of entities that can attach your tax refund and send your plans into disarray.
There are any number of entities with any number of reasons to have their fingers on your tax return. Your refund can’t be garnished by private creditors, and only certain types of debt are collected by government entities. Let’s look at the most common players.
If you’ve been doing a little bit of mental math, you are not alone. Debt is seldom a one-dimensional situation, and most people who have debts have more than one kind. There are even good debts and bad debts – though you could say that all debts are bad ones when you can’t pay them. If the possibility of using tax refund to pay off debt disappeared like a friend who owes you money, don’t give up yet. Let’s talk about debt and how to get out from under.
Take a deep breath and think past the disappointment. You might not have that chunk of cash in hand, but that can be a good thing! The thing about debt is that it has interest and late fees attached, so the amount you owe is never just the principal. It’s time to plan how to handle your debt without relying on using tax refund to pay off debt.
First, you need to ascertain exactly how much debt you’re in. Debt spread across different cards and loans can be very difficult to quantify until you sit down and add up the figures. In fact, the number one sign of being in too much debt is that you don’t know how much money you really owe. If you are paying your bills weight or borrowing money to pay them, you have too much debt. When everyday expenses require extraordinary measures, then you need to reassess. Once you have that bottom line all filled out, you can see how far you are into the red. Next, it’s time to figure out how much you have coming in without that tax refund and how much you can afford to pay each month to service and pay down your debt.
Before bankruptcy, it’s possible to find other options for paying down or otherwise getting your debt in hand. For instance, a consolidation loan can pay off high-interest credit cards and even a car loan leaving you with just one monthly payment and one interest rate to handle. Consolidating student loans works much the same way. With other debts, you may be able to negotiate a better deal and settle for less than you owe, while also cutting interest and penalties.
Bankruptcy is typically a last resort, when your debts are overwhelming and your ability to handle them is failing. Whether you are filing for a chapter 7, chapter 11, or chapter 13 bankruptcy is entirely dependent on whether you are filing for personal or business bankruptcy, if you need a liquidation bankruptcy, or if you can settle with your creditors and come out more or less intact.
Over the years, Van Horn Law Group has posted numerous entries to this blog on a diverse array of subjects. We put this information here for you because we realize that people need resources and a way to understand their circumstances. We hope that you will find these resources and references of use as you seek to understand that, its impact on your finances, and even on your well-being. We also want you to know that there is a light at the end of the tunnel and that someday you can look forward to being free and clear of debt.
Van Horn Law Group is a specialty practice focused on debt and bankruptcy. What bankruptcy is not the answer for every case, we have other solutions on tap that can help you to reduce your debt, make it manageable, and eventually paid off. When bankruptcy is the best possible solution, we are there to make a complex legal procedure understandable, accessible, and successful. Contact our offices in West Palm Beach or Fort Lauderdale, we are open seven days a week. We also urge you to take advantage of our free consultation on your initial visit. Get in touch with us today and get a grip on your debt.