FAQ’s on Tax Refunds and Bank Setoffs

FAQ’s on Tax Refunds and Bank Setoffs

At this time of year, many people are looking forward to receiving their tax refunds. If you are experiencing financial challenges, a tax refund can feel like a lifeline to help keep you afloat and provided needed money for you and your family—you certainly don’t want anything to happen to prevent you from getting access to your refund. However, it is possible that your tax refund could be in danger of being “setoff” by your bank.

Below are answers to some frequently asked questions about tax refunds and bank setoffs—If you are concerned that your tax refund may be taken by your bank, contact an experienced Atlanta Bankruptcy attorney who can look at your personal situation and give you the guidance you need!

  1. What is a Bank Setoff? A bank setoff occurs when your bank takes money from one of your deposit accounts, like a savings or checking account, and uses it to pay other debts you owe them.
  2. When Does a Setoff Occur? Under Georgia law, a bank has a right of recoupment or set-off to anytime they are owed a debt. For example, if your bank issued you a car loan, and you get too far behind on the payments, your bank can automatically withdraw money out of your checking or savings account to cover the backpay on your car loan. While a bank may not offset your account after your first missed payment, it is important to understand that they can take money from your deposit accounts and put it toward your other debts—you need to be aware of this as you may be planning to use those funds in a different way.
  3. Can My Bank Use My Tax Refund in a Setoff? If you are behind on other debt payments to your bank, they can use money from your other accounts to “setoff” those debts. If your tax refund is automatically deposited to your checking or savings account, the bank could immediately take your tax return money and use it to pay off your other debts.
  4. Can I Get My Tax Refund Back if the Bank Uses it in a Setoff? Unfortunately, if the bank takes your tax refund money in a setoff to pay back your other debts, you cannot get your money back. From the bank’s perspective, they were already owed that money and it is being used to pay off your debts, so they will not give it back to you. This is problematic if you needed your tax refund for other purposes.
  5. Can I Prevent a Bank Setoff? There are a couple ways you can prevent your tax refund from being taken by the bank to offset your other accounts. First, you could have your tax refund deposited to an account in a different institution. If your tax refund goes to an account in a totally different bank, the bank where you have your other debts cannot touch it. Another option is to consider filing for bankruptcy. When you file for bankruptcy, an automatic stay immediately goes into effect. This stops collection actions, bank levies or even a setoff against you. A bankruptcy may still have an impact on your tax refund, so it is important to speak to a skilled Atlanta Bankruptcy attorney if you are considering this option.

Talk to an Experienced Atlanta Bankruptcy Attorney

If you are worried about your financial situation and what may happen to your needed tax refund, contact the knowledgeable attorneys at The Ballard Law Group. We have years of experience helping clients facing a variety of financial issues—we can take a look at your situation, answer your questions, and provide guidance as to what would be the best financial choice in your specific case. Call us today to set up a free case consultation at (404) 800-9939!

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