Falling behind on your loan or credit card payments is never a pleasant situation to be in. You're probably wondering how this may affect your tax refund. Watch this video to find out more about how judgments can affect your tax refund.
Hello, I'm Scott from TurboTax, with important information about how a court judgment can impact your tax refund.
Falling behind on your loan or credit card payments is never a pleasant situation to be in. But if this happens to you, you aren't alone. If you are behind on your credit payments, creditors will often do whatever is necessary to secure repayment of the debt, which can include filing a lawsuit against you in court to obtain a judgment.
How a creditor who has a judgment against you can go about collecting the debt from you depends on the laws of the state you live in. But when it comes to your tax refund, the IRS won't allow a private creditor to intercept or garnish it.
When a creditor obtains a judgment against you and you fail to pay it within the stated period of time, there are other ways they can obtain the funds from you.
Some of these collection methods include placing liens on your property, garnishing your wages or seizing your assets, such as freezing the funds you have in your bank account.
Therefore, if you deposit your tax refund into your account, it's no longer protected from your creditors. If your creditor uses the court judgment to seize the funds in your bank account, it no longer matters where those funds came from.
Also keep in mind that there are situations when your tax refund can be taken by a creditor even without a court judgment. This is only possible when your debt relates to past-due federal and state income taxes, past due child support payments, and other debts you have with the federal government.
One thing you should always do when a creditor obtains a judgment is to check with the laws of your state to determine which collection methods they're able to use.
Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.