The COVID-19 pandemic has made 2020 and even 2021 difficult for many people. To help people make ends meet, stimulus payments were issued through the federal government. We all want to benefit from these checks, but if you are currently struggling with debt and considering filing for bankruptcy to relieve you of your financial burdens, you may be wondering if you will be able to keep your stimulus money.

Filing for Bankruptcy and Keeping Your Stimulus Checks

If you are expecting to receive or already received your stimulus payments, they will not impact your bankruptcy and, moreover, you will likely be able to keep it. These stimulus checks are part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and are designed to keep bankruptcy trustees from factoring them into calculations regarding a debtor’s disposable income or monthly income.

Additionally, a notice was issued from the U.S. Trustee Program, stating that Chapter 13 and Chapter 7 trustees are unlikely to recover stimulus money from debtors. The stimulus payments you receive also likely pale in comparison to your debts, which is why they will not be the target of any bankruptcy trustees.

If you are thinking of using your stimulus money to pay off some of your debts, this is probably not the best path forward. The average bankruptcy filer owes more than $20,000 in unsecured debt, so your stimulus payments will not even make a dent if you owe anywhere close to that amount. Instead of wasting your stimulus money on debts that can be discharged, file for bankruptcy.

Tax Refunds

Keeping your tax refunds depends on the how much you receive and the type of refund. Child Tax Credits, Earned Income Credits, and Recovery Rebate Credits are 100% exempt which means they are protected in bankruptcy. The rest of the refund can be protected up to the applicable exemption limits. It is best to have a bankruptcy attorney review your tax returns to see what can be exempted and whether it makes sense to wait until after you receive your tax refund to file for bankruptcy.

Get Started and Discuss Your Case with an Experienced Bankruptcy Attorney Today!

If you are struggling financially and cannot pay off your debts, the skilled legal team at The Southard Law Firm, L.L.C. can provide the knowledgeable guidance you need to navigate every step of the process, so you can overcome your financial obstacles and resolve your debts.

Reach out to our law office today at to set up an initial case evaluation with our experienced bankruptcy attorney to learn more about your legal options and what we can do to assist you.