I'm married with three kids and generally receive around $12,000 back. We've never owned a home.
If you have $12,000 dollars in tax returns the trustee may make you pay that money to the estate-or your creditors. You cannot use the homestead exemption, you have to use your personal property exemption and any other exemption that you jurisdiction allows. You need to talk to a bankruptcy attorney in your area that knows the trustees to see if you can file.
You might want to consider the timing of your bankruptcy. In our jurisdiction, there is nothing wrong with waiting until you use up your tax refund with normal living expenses prior to filing the Chapter7. One of the expenses you might want to consider is hiring a bankruptcy lawyer who can offer you the best advice on filing a successful case.
The exemption laws are different in each state, but if you are not able to use the homestead exemption on real estate, state law would have to specify that it can be used as a "wild card" as well. Some states do provide that the EIC portion is exempt. Most states do not have this provision, but I am posting a link to a general description of the available exemptions for all 50 states so you can see for yourself. I would urge you to change your tax withholding status so you take home more money on your paycheck and have less go towards that big tax refund. It sounds like you could have an extra $1,000/month to spend on necessities if you made this change. Hope this perspective helps!
You are correct that you can use your Virginia "homestead" exemption to protect your refund. You are your husband both are allowed $5000 and the kids are worth $500 apiece. So you have $11,000 to work with.
Questions: Are both of you paying taxes? If you, or he, paid it all in, then you can't use the other spouse's exemption to cover it.
Second, do you need your "homestead" to cover something else? Like money in the bank. Savings bonds? A second car paid for in the name of one spouse?
So, you are probably able to protect some of it and maybe able to protect almost all. But need to have all your details to be sure. that's what lawyers are for.
Chapter 7 Bankruptcy Attorney
You can use your Homestead exemption to protect most of your tax refund. You and your husband each have a $5,000 exemption, plus $500 per child. However, if you can wait a few months, you may be able to use another more powerful exemption to protect your money without using all of your Homestead exemption. Here's how - Virginia has a wages exemption which protects 75% of your earnings from your creditors. The exemption still applies to money which your employer has paid directly into your bank account.
Over the next several months, hopefully you will earn $12,000 and probably spend about the same on rent, food, car expenses, etc. Over time, you will spend the tax money, while your wages pile up in your bank acccount. In a few months, you'll still have $12,000 in your bank account, but 75% of it will be exempt as wages, so you'll only need to use $3,000 of your Homestead exemption. Why does this matter? Virginia's Homestead exemption is a once in a lifetime exemption, so you want to protect it if you can. Be cautious, however, because you don't want to wait too long if creditors have judgments against you and could garnish your bank account (the wages exemption will still protect the money, but your account will be frozen while you sort it out in court).