Last week, our blog spent some time discussing how those who discount bankruptcy as an option owing to the size of the filing fees might want to reconsider their position due to the availability of both fee waivers and installment payments.
Interestingly enough, experts indicate that there is another source of income to which people can look to cover all of the costs of filing for bankruptcy that might not otherwise be obvious: tax refunds.
Indeed, the Internal Revenue Service has reported that the size of the average tax refund in 2016 was a rather generous $2,860, more than enough to pay for the typical consumer bankruptcy filing.
While some might understandably question this approach — perhaps hating to see the opportunity to make a necessary purchase forfeited or wondering if they aren’t better off saving the money — statistics show that this is a time-tested tactic for consumers.
Data from the Administrative Office of the U.S. Courts shows that Chapter 7 bankruptcy filings in March were 26 to 34 percent higher during March, and 15 to 25 percent higher during April from 2013 through 2016.
Even conceding that a tax refund might be a viable option for subsidizing a Chapter 7 filing, it’s possible that consumers still have questions about whether this is even the right course of action.
According to experts, consumers should strongly consider Chapter 7 if any of the following are true:
- Problem debts, such as credit cards, medical bills or other high-interest loans, account for more than 50 percent of your annual income
- Debt is so problematic that it prevents you from performing other vital everyday financial tasks, such as saving for retirement or taking out a car loan
- There appears to be no viable option for paying off the majority of debt within five years
If you would like to learn more about the fresh start offered by Chapter 7 bankruptcy, consider speaking with a skilled legal professional who can explain the law, answer your questions and proceed with a plan of action.
