Best Ways to Spend Your Tax Refund When You’re In Debt

Best Ways to Spend Your Tax Refund When You're In Debt

If you have had extra money taken out of your paycheck every week through the year, you may be expecting a large tax refund. You might even expect one if you didn’t have extra funds taken out, but are able to claim head of household or earned income credit. If you have been struggling from paycheck to paycheck, that tax refund can look like a good chance to have some fun and maybe splurge on a few things you have wanted through the year. On the other hand, you can reduce your strain for the coming year by using your tax refund wisely.

Consider Whether It’s Time to File Bankruptcy

Take a good hard look at your finances. Do you have any reason to believe they will see significant improvement within the next year or so? If not, now may be the time to file bankruptcy. You can use at least part of your tax refund to pay for the bankruptcy and have the situation taken care of once and for all. Otherwise, you may be looking at a case of doing the same things you did last year and just hoping that nothing serious goes wrong so you can afford to have some sort of life. You will also have to continue to deal with the endless phone calls and late payment reminders and the overwhelming stress of bill collectors if you don’t take this opportunity to address your debts.

Attempt to Deal with All Creditors

The truth of the matter is that if your debt isn’t all that significant, you may be able to pay a lot of it off with your tax refund. Make a list of all the debts you owe and then try to figure out how much you have to work with to catch up on late payments or pay the debts in full.  Many creditors will accept a fraction of the debt due just to resolve the matter. However, if you have so much debt that even paying pennies on the dollar still won’t get them paid off, it’s probably time to look for a bankruptcy attorney. Do not sacrifice your ability to feed your family or pay your mortgage for the sake of addressing your debt.

Debt causes a great amount of stress and worries that you don’t have to continue to carry by yourself year after year. Unless you expect large quarterly bonuses at work, your tax refund may be your one chance to make things right for the year. Remember that the sooner you take care of these debts, the sooner you can move on with your life. If you have already attempted to resolve your debts and don’t seem to be getting anywhere, it’s a good idea to contact a bankruptcy lawyer as soon as possible.

Share this post with friends and family members dealing with debt and if you know how you plan to use your tax refund, let us know in the comments.

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