When you formally submit your bankruptcy documents, you must disclose all the assets in your current possession. These assets may make up what is known as your bankruptcy estate. Then, your bankruptcy trustee may access this bankruptcy estate to pay off your outstanding creditors little by little, if applicable. Understandably, you may worry about certain assets within this estate, especially if they are significant in value. Among these assets of concern may be your earned income credit. Read on to discover whether the bankruptcy court can take your earned income credit and how a seasoned Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq. can help you protect every possible asset.
What is an earned income credit?
By definition, the United States earned income tax credit is a refundable tax credit for low- to moderate-income working individuals and couples. Particularly, this may be designated for those who also have children. That said, the amount of earned income credit you may receive yearly is based on your exact income and the number of children dependent on you. As of 2024, the maximum earned income tax credit you may receive is as follows:
- If you do not have any children: a maximum earned income credit of $632.
- If you have one child: a maximum earned income credit of $4,213.
- If you have two children: a maximum earned income credit of $6,960.
- If you have three or more children: a maximum earned income credit of $7,830.
Can the New York bankruptcy court take my earned income credit?
If you are undergoing Chapter 7 bankruptcy proceedings, you may be able to protect your earned income credit from being distributed to outstanding creditors. However, this is so long as you petition for an exemption properly and on time. For one, you may apply for the New York wildcard exemption, which may allow you to protect up to $1,175 worth of your earned income credit funds if you do not use the homestead exemption. Or, you may apply for the New York cash or banking account balance exemption, which may allow you to protect up to $6,000 worth of your earned income credit funds in cash form or saved in your bank account.
On the other hand, if you are undergoing Chapter 13 bankruptcy proceedings, you may still be able to protect your earned income credit. However, you may be unable to protect any subsequent income received in the following years. This is because of your court-ordered three- to five-year repayment plan. Meaning that you may have to contribute these funds toward your repayment plan.
In conclusion, if you are unsure of your next move, resort to a competent Rockland County bankruptcy attorney. Someone at The Law Offices of Allen A. Kolber, Esq. will know the legal option that works in your best interest. So call our firm today.
