Published On: February 28, 2019
(WARNING: The following is Arizona specific) Most people do not understand that if a creditor sues and obtains a judgment they can take the money in your bank accounts, including tax refunds. The only protection money that is exempt. I know this does not sound fair – especially when the creditor is taking your child care or earned income credits. These are monies you need in order to pay rent, buy food, repair your car or take care of health care needs.
Can a creditor really take the money I need to pay rent or buy food?
Each state has certain items “property” that is exempt (creditors cannot take). Unfortunately, Arizona does not protect child care credit or earned income credits (as of 2019). So, if a creditor has the ability to get into your bank account they can take everything except $300 (unless your income is social security or VA benefits – but there are rules governing how to protect those funds).
If I file bankruptcy will I still lose my tax refunds?
Unfortunately, PROBABLY, assuming you use the Arizona exemptions in your bankruptcy. The saddest story I hear is when someone files for bankruptcy not understanding they will lose their tax refunds (money they desperately need in order to survive). Read the AzCentral article about two wonderful families who faced this problem (just two of thousands who face this every year). One family knew they would lose their refunds because they hired a bankruptcy lawyer so they were not surprised. Sadly the other family did not know because they filed bankruptcy on their own and never talked to an experienced bankruptcy attorney (most offer free consultations). That family is living on less than $1,400 per month for a family of 5 and really, really needed the tax credits. They will lose their entire tax refunds of $9,000 (the cost to hire a great attorney is approximately $1,500).
MUSINGS FROM DIANE:
Unlike most other states, Arizona law is very old and does not protect these tax credits. The law needs to be changed in order to protect all
Arizona families.
I have a group of wonderful volunteer bankruptcy attorneys (Arizona Consumer Bankruptcy Counsel) who want to change the Arizona law and help protect all Arizona families (even if they do not file for bankruptcy protection). Please contact me if you know a legislator who cares about families or stories that we can share with a legislator in order to change the law.
About the Author: Diane Drain
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
“You folks are the BEST OF THE BEST in Arizona.” M.H.
You and Jay are the best attorneys I have ever had or needed and thank God for the Honorable Robert Gottsfield in recommending you folks – I would have never made it through the entire process without you and Jay and God Bless you both always and stay in touch as well. You folks are the BEST OF THE BEST in Arizona.
“My only regret is that I didn’t find Diane sooner.” K.H.
I can’t say enough good things about Diane. The way she handled my not typical circumstances was amazing. I was very nervous to start the bankruptcy process but Diane just has a very comforting way of explaining the whole process. My only regret is that I didn’t find Diane sooner. If you find yourself in a financial situation that you can’t correct on your own, please Call Diane Drain as soon as possible.
“Filing for bankruptcy can be a stressful life event” R.A.
Filing for bankruptcy can be a stressful life event, and selecting the right attorney can add to this stress. Diane and Jay were a pleasure to work with, and it is obvious that they are passionate about helping people get their life back on track. I would highly recommend them if you need a bankruptcy attorney.
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