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Bankruptcy: Debt is the No. 1 use for tax refunds

Some individuals in California and across the nation may be planning to use their recent tax refunds to take a long overdue vacation or purchase an item that has been on their wish list for months. However, others may have alternate plans for their refund, such as using it to catch up on financial obligations. Those who feel that their refunds may do little to solve their existing monetary woes could benefit from exploring the relief provided through outlets such as bankruptcy, but they may have reservations about the process.

After receiving their tax returns, some individuals may plan to use this windfall to pay for a big ticket item or build up savings. However, recent studies suggest that as many as 30 percent of consumers reportedly plan to use their refund to pay down on debts. This percentage also fluctuates depending on the age group, as nearly 40 percent of younger Americans will use tax refunds for relief, while only 20 percent of those approaching retirement share a similar goal.

When it comes to deciding whether using a tax refund to pay down debts is a smart move, experts suggest that understanding how debts can affect one's life could prove helpful. Those who carry debts with high interests rates may find that reducing balances could free up a substantial amount of monthly income. However, for those whose refund might prove insufficient enough to bring debts to a manageable level, additional assistance may be in order.

Significant amounts of debt can have a catastrophic impact on various areas of a person's life. Those who continually struggle to keep up with monetary obligations may wish to know more about their available options for relief, and they could find it helpful to seek advice on these options from an experienced attorney. A bankruptcy attorney in California can examine a client's financial situation and assist him or her in developing a strategy to reduce or eliminate debts and work toward a healthier financial future.

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