Arizona Bankruptcy and Tax Returns-Facts to prepare for your Bankruptcy. We are in a very critical time of the year in regards to filing your 2011 tax returns and preparing for a Phoenix Arizona Bankruptcy. We are getting several calls as to the best course of action in regards to filing both. Below I discuss some tips to appropriately move forward with filing your taxes and subsequently filing your Arizona Bankruptcy. State and Federal Tax Refunds are non-exempt assets of a Bankruptcy Estate. What this means is if you file a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in Arizona, and subsequently get a tax refund for 2011 or any prior years, these refunds are assets of your bankruptcy, for the benefit of your creditors. We advise all of our Arizona Chapter 7 Bankruptcy and Chapter 13 Bankruptcy clients to first prepare and file their tax returns for all outstanding years, receive and spend their tax refunds, then file their bankruptcy. As long as tax refunds are received prior to filing a Phoenix Arizona Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, and spent on “reasonable and necessary” living expenses, a trustee can not take them. Remember, the day you file your Arizona Chapter 7 Bankruptcy or Chapter 13 Bankruptcy you are only allowed to protect $150 per debtor. So you must spend down the refund to below $150 for a single debtor or $300 for joint debtors. If you are contemplating filing an Arizona Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, and are getting a tax refund, call us today to properly plan. We offer a free consultation where one of our experienced Phoenix Arizona Chapter 7 and Chapter 13 Bankruptcy lawyers will discuss the best course of action for you. We can be reached at (480) 540-3815 or www.mmwazlaw.com.