When you file bankruptcy, you are going to lose your tax refund.  Your tax refunds (both state and federal), in Ohio, are looked upon as a little savings account in disguise, subject to the $500 cash exemption plus your $1,325 Wildcard exemption, if you don't use it all for something else.

    The Earned Income Tax Credit and the Additional Child Tax Credit are 100% exempt portions of your refund.

    If you don't get a refund, owe recent back-taxes, if your refunds are typically small, or if child-support and/or student loans grab your refund, then you don't have to worry about this.  It may be a good idea to let those debts increase so they actually do take your refund. 

    If you earn W-2 income, then typically you do enjoy receiving a large refund early in the new year and you may lose it if you don't plan accordingly.

    If you do get a pure refund or a large state refund, it depends first on when you file the Bankruptcy.  Early is good, late is bad.

    So if you file on April 1st of the year, April 1st is the 25% day of the year gone, so you lose only 25% of your refund, but you still keep your $500 cash and $1,325 Wildcard exemptions from that.

    So for most people, its unlikely that their non-exempt portion will exceed $1,825, and even if it does, it still has to be worthwhile for the trustee to administer it, and it will likely be deemed "abandoned."

    If you file on October 1st of the year, that is the 75% day of the year gone, so you lose 75% of your refund, but you still keep your $500 cash and $1,325 Wildcard exemptions from that.

    If you file on December 31st of the year or into the New Year, without waiting for your refund to come in the mail so you can spend it, you lose 100% of it, but you still keep your $500 cash and $1,325 Wildcard exemptions from that.

    Here is a real life example, Sylvia has six children and expects to receive a $6,000 combined state and federal refund.  She is being garnished $500 per month, her utilities are going to be cut-off, children's services may be concerned, and someone tells her how great Bankruptcy is and she files on May 1st.  Mathematically, the trustee may take 33% of her refund, i.e., $2,000, based on the filing date of April 1st and let's not consider her completely exempt Additional Child Tax Credit or the Earned Income Credit of typically $4,500.  The trustee has to then subtract her remaining $1,625 from that portion.  The $1,625 and not the entire $1,825, because she had $200 in her bank account, cash, deposit, etc., at the time of filing.  (Incidentally, bankruptcy should take you out of ChexSystems.)

    So to the letter of the law Sylvia, and not considering the credits, will only lose $375 and this is not probable because of the Trustee's costs associated with distributing $375 up to around $900 to her creditors is probably not going to be deemed as worthwhile and will be "Abandoned" by the trustee.

    Let's say, Sylvia files Bankruptcy on December 31st of the year.  December 31st is the 365th day of the year, so she will lose 100% of her $6,000 tax refunds, she does not have any Child Tax Care Credit or an Earned Income Credits, and she also had $0 based on cash and bank account money on her day-of-filing.  So, Sylvia gets to keep $1,825 ($6,000 minus $1,825,) and the trustee gives her creditors $4,175.

    Remember, that those "reverse" income taxes like the Earned Income Credit and Additional Child Tax Credit can be quite sizeable and are yours to keep. So in Sylvia's real world, worst case scenario, she files on January 12th without receiving her refund, but she knows her refund will be $6,000 federal and $500 state.  She has $4,500 in Exempt Earned Income and Additional Child tax credits.  So, based on when she filed, her entire $6,500 she has yet to receive is part of the bankruptcy estate, so to speak.  Therefore, no pro-rating based on the day of the year she files her bankruptcy and triggering the bankruptcy estate. So the math first subtracts the Additional Child tax credit and that Earned Income Credit from the federal portion: $6,000 minus $4,500, leaves $1,500. $1,500 plus her state refund of $500, leaves $2,000.  However, now she gets to subtract her $500 cash and $1,325 Wildcard exemptions. Which still leaves just $175 to possibly lose.

    Under this new law, Ohio has caught up with a lot of other states that have adopted this more "pro-debtor" position.

    You should also know that just because Sylvia may have planned wisely, she cannot spend that $6,000 on a diamond, hide it under her mattress, lie at the creditors' hearing that she doesn't have a $6,000 diamond hidden away somewhere, and then, after her discharge, sell the diamond and buy a new car.

    When you file early in the year, the Trustees usually ask for a list of how you spent that money, sometimes, they even ask to see receipts. Also, it is not a good idea to do a rapid refund (RAL) or deposit the money in an account mixed with other funds if you do get a refund near or after filing bankruptcy.

    The rule is that you can only spend that money on Necessary & Ordinary things or exempt things.  Necessary & Ordinary things cannot be counted double as what you have spent your paycheck on already. Exempt things are what we talked about earlier, e.g., a $4,000 car, household goods and furnishings, certain clothes.

    So, in order to shelter that money, if you don't own one already, you may want to buy a home or a car so the sales amount or down payments is less than the respective exemptions.

    Usually, you can avoid the most problems by not paying-off or giving more than a normal payment to any one creditor $600 or more within 90-days before the bankruptcy or making any sizable loans or gifts of any kind to any relatives or close friends within 2-years of the bankruptcy.

    Bankruptcy may make you ineligible for some student loans for two years but this is mostly limited to just "Graduate" student loans.  Also, payday loans must be at least, approximately, 2-months-old to be dischargeable. However, 'payday loans' are no longer offered in Ohio.

    Sorry, non-profit, student loans are usually non-dischargeable unless there has been some fraud, the school went out of business before you obtained your degree or certification, you have had a very severe medical or financial setback, or you have become elderly.

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