As we enter tax season, you may be eager to get to the tax preparer to find out how much you will get back from Kansas and the feds. What if your tax refund still won't make a dent in credit card debt or medical bills that piled up while unemployed or battling illness?
This may be the time of year to get a fresh start. Bankruptcy is not the only option. There are ways to leverage your tax refund to get you even further out of debt.
First, try to minimize the amount that you spend on tax preparation. Get several quotes - ask a local accounting firm as well as a national chain. If you have a relatively simple tax return (for example, two W-2s and child care expenses), consider using tax software or free file from the IRS.
EIC & Additional Child Tax Credit
Second, avoid Rapid Anticipation Loans (RALs) and Refund Anticipation Checks.
To help combat fraud, the IRS must hold onto Earned Income Tax Credit and the Additional Child Tax Credit refunds until February 15. Many taxpayers will not see their refund check until the week of February 27.
Because of the delay, many are pushing the RALs and similar products. Why, because those loans (advances on your tax refund) are almost as bad as a pay day loan when you consider the cost or equivalent interest charge. You have waited all year for your tax refund. A few additional weeks are not that inconvenient.
Best advice, is WAIT!
Keeping the lights on
Depending on the tax refund to make your current utility payments is a good sign that you need to get with a professional to review what is going on with your finances. One of the worst things that you can do is to use the tax refund for everyday expenses. Using it just to make another payment is not a good approach.
Filing a bankruptcy stops all collection efforts and they can't turn off your utilities. The "automatic stay" that arises when you file gives you breathing room to work out a plan. Whether your debts are medical bills, student loans, credit cards or a combination of many types of debts, bankruptcy may be your best solution.
You aren't going to automatically lose your home or car when you file bankruptcy. You have exemptions provided by law which allows you to keep certain types of property. You may have to pay for them but you still get to keep them. We are here to show you the best options and solutions.
The tax refund you get today will make you feel better this month, but next month it starts all over again. While you have your refund in hand, call us so we can help you make the best decision for you. The solution for you is different than your best friend's solution. Talk to a professional who can offer advice for your situation. Call 785-379-6642 now and get your free consultation.