Can Creditors Take my Tax Refund in New York City?

When you are behind on a debt and unable to make your payments a creditor will use any means available to try and recover what’s owed. Harassing phone calls and letters if ignored could turn into a judgment against you and eventually wage garnishment from your paycheck. It’s also tax season. If you are expecting a tax refund but think your creditors might try to garnish it as well, don’t worry Federal law prevents your creditors from getting their hands on your tax return. Only state and federal government agencies can take your refund directly.

If you are behind on your taxes, have child support arrears, or need to repay unemployment compensation, one of the associated government agencies can garnish your tax return, or “offset”, the debt you owe to the government. Tax debts are considered to be “priority debts”, so the IRS will always pay itself first before making the rest of your refund available to other governmental agencies. But private creditors, like credit card companies, banks or, hospitals cannot garnish your tax return. However, while private creditors have no access to your tax return directly, once the funds hit your bank account the money is no longer protected, and can be garnished like any other funds in your account.

So while your creditors can’t get to your refund directly, they will be ready to pounce on it the moment it hits your account. As long as you don’t deposit, they won’t have access, but this is only a stalemate with your creditors, not a win. There are better ways to deal with wage garnishment. If you are already being garnished and are now concerned about losing a tax return too, then it’s likely your financial situation is getting desperate. It’s time to stop throwing good money after bad. Seek the advice of a bankruptcy attorney in New York City.

Bankruptcy will eliminate the toxic debt that has been keeping you down and will immediately stop any wage garnishment from your creditors. Bankruptcy has some consequences, but the consequences of garnishment are usually much worse. If you are concerned about losing a tax refund to a creditor and live in New York City get the facts for yourself. Contact the Law Offices of William Waldner online or at 212.244.2882 to arrange a free consultation today. We only practice bankruptcy law and maintain a 99% Chapter 7 bankruptcy discharge record in New York City as of 9/31/16.

**** DISCLAIMER: This article is intended for educational purposes only. By reading no attorney-client relationship has been created. Prior results do not guarantee a similar result for future clients.