Numerous businesses have had to file for bankruptcy recently. One prominent example is Mattress Firm, one of the biggest mattress stores in the United States, which has had to close 16 locations in Arizona. However, personal bankruptcies are just as devastating, but they fail to make headlines.
With the end of 2018 almost here, it is time to start thinking about tax season. Many people know they will need to file for bankruptcy in the near future, but then they receive a sudden influx of money with their tax returns. Before filing for bankruptcy, you want to make sure you do not make one of the following mistakes with your tax return.
Hiding the money
When you file for bankruptcy, the law requires you to claim all the money you have in your possession, including anything you got as a refund. There is a record of your tax return from the federal government, so you will not be able to claim you do not have it. There is also a possibility you will be able to retain those funds after filing, so it is best to stay on the right side of the law.
Buying luxury items with it
In the months leading up to the filing, you want to avoid making any extravagant purchases in general. When many people get their tax returns, they see it as an opportunity to go on a fun vacation or buy something substantial they would not have been able to purchase otherwise. That includes "wise" investments, such as fixing the deck in the backyard.
Paying back relatives
You do not want to get loved ones mixed up in your bankruptcy filing. Family members may have loaned you money to help you out. You may feel like paying them back before getting everything squared away with your creditor. By giving money to friends and family members, the court may think you have attempted to hide your assets, so avoid this action.