What would you like to do?
Will the bankruptcy court take your tax refund if your case has been closed for a year?
This question gets asked somewhat frequently. The general consensus is that it's sort of regional and case specific. A particularly large refund interests them for sure. However, any that they do consider as a bankruptcy asset would have had to be paid over (withheld) in the pre filing periods. If your case has been closed for a while, and you filed yet sometime before that, this years refund would have been from post filing earnings and not subject to them.
14 people found this useful
Was this answer useful?
Thanks for the feedback!
It depends on the individual. Your lawyer should be able to answerthis question the best because they know the situation. I had thissame question. My lawyer told me that no th…ey will not take taxrefunds. However, if you owe student loans to the government theycould take your refund. I had no problems receiving my tax refundsafter filing bankruptcy. Answer I believe if you get any type of money over $2000 the court willmake you pay it on your debts, if you receive it within 6 monthsafter the discharge. When I went to court, they told me if my taxestotaled more than $2000, we would have to pay it to the court. Weonly got $1200, so we got to keep it. Answer The answer to that question varies from jurisdiction tojurisdiction, and also depends somewhat on which Chapter ofbankruptcy you are filing. In Southern Indiana, trustees haverecently started taking tax refund checks of $1,000.00 or more inChapter 7 cases. In Chapter 13 cases, some trustees take halfregardless of the amount, and others take half if it is a sizableamount, and none if it is $1,000.00 or less. Also, each State hastheir own exemptions (which say how much property you can keep), soif you are in a State that lets you protect a lot of cash, then thethreshold at which trustees seize tax refund checks may be higher.A good rule of thumb is to assume you're going to lose it. If youlose a $2,000.00 refund check but you discharge $20,000.00 inbills, you're still $18,000.00 better off, so forget the refund andmove on with your life. And, if you luck out and get to keep itthen you're pleasantly surprised, as opposed to expecting to keepit then being let down when the trustee takes it. Answer Yep-in Arizona-they took a $600 State refund, and a $1300 Federalrefund. Oh well, as long as I am in the clear, what difference doesit make? Answer I'm confused by all the above. Bankruptcy is done under FEDERAL laws and in a FED Court. I shouldthink that your State of filing, or residency, would have little ifanything to do with the rules they follow -- except to say that therules concerning property and such (like Arizona is a communityproperty state), may have influence. When filing you must claim and attest to all of your assets andliabilities to the court. Obviously, penalties for not doing socorrectly can and should be fierce. Forgetting an asset - and thenkeeping it - that just seems to be fraudulent and possiblycriminal. An anticipated refund (tax or otherwise) would be anasset you must declare. I should think that like any other "free"asset, it may be used to satisfy creditors. It certainly should be...if I was a creditor and you asked thecourt to eliminate a debt you owed me....and it did - but at thesame time allowed you to continue to look in the mail every dayuntil Bank US sent you some cash you had stashed with them....thatwould be grossly unfair! You can imagine why: I can manipulateeasily the amount of refund I expect, in anticipation of bankruptcyor even during, many ways: Decrease the number of withholdingexemptions I request from my payroll (so more money is withheld),even make an estimated payment (or have additional amounts withheldfrom payroll) - which self employed or someone with non-employeeincome (like investment income, etc.) is required to do. MoreInput Bankruptcy can either be a state or federal filing depending onwhether or not the state has opted out of the federal bankruptcyprocedure and the amount of debt. Tax refunds are levied depending upon the time difference betweenthe bankruptcy filing and the receiving of the refund. In manycases the amount a federal refund is subject to levy will bepro-rated monthly. Please see the link for "Bankruptcy Action" tofind out if your state requires federal or state bankruptcy filingor a choice between the two. More on themore I'm fairly certain Bankruptcy is ALWAYS handled under Federal Law,at a Federal court. There is an entire level of Federal courts thatonly does bankruptcy and interestingly, it has major power and cantrump and take control of matters even in other courts - likelitigation. Like most all matters determined to be the purvue ofthe Feds, a State cannot opt out - or by essence over take aFederal right/obligation. (And when you consider operating Courtsis expensive, they have little motivation to). The federal natureis needed, if for no other reason than to avoid (perceived orotherwise) preferential treatment of a state residentcreditor/debtor to those who may also have something at stake inthe filing but aren't a taxpayer or resident there. It would bemaking them subject to the dictates of a jurisdiction that theyaren't supposed to be subject to - a Constitutional issue. However, maybe the confusion is that as in all Federal courts,there are many different DISTRICTS of the US Bankruptcy Courts,generally with District names of the primary area they cover. EX:US Bankruptcy Court of the Alabama District; US Bankruptcy CourtEastern District of New York, etc., etc. As in all Federal District Courts, some procedures, limits, andmany precedents (generally decisions) are individual to thatCircuit, and in fact, may be entirely contradicted in others. (Whenthis becomes too problematic, it becomes a US Supreme Court matterto decide what should be universal). I would agree it makes sense that only that part of a taxoverpayment that is from the pre bankruptcy filing period shouldever be subject to the bankruptcy. (So, something along the way ofif you filed bankruptcy half way through the tax year, only half ofthe overpayment is subject to bankruptcy). Note a Corporatetaxpayer may have a different result because it has a "short taxyear", with one starting and ending on the date of bankruptcy. Actually, the States can "opt out" of the Federal Exemptions forBankruptcy actions. In Maryland, state law determines exemptionsand collection procedures. The short answer is yes, the Trustee may attempt to go after yourtax refund AND, depending on the state you are in, you may be ableto get it Exempt (meaning, Trustee can't touch it). Generally, depending on what Chapter you filed under, the issue ofyour tax refund will be included in the "plan" decided by thecourt. They are decided on an individual basis but forfeiting aportion of your tax return if it is over a certain amount seems tobe what is currently happening.
Answer . I think it depends on when the bankruptcy is discharged, but it would be discussed at your meeting with the creditors and the trustee. If it wasn't discussed, the…n the refund is yours..
Can the bankruptcy court take your tax refund for 2004 if bankruptcy was filed in Dec 2004 if this was not discussed at the Creditors Meeting?
I think it depends on when your debts are discharged. If they were already discharged, it was a Chapter 7 bankruptcy, and it wasn't discussed at the creditors meeting, then th…e refund is yours. Besides, imagine if you filed on April 15th. You might not get your refund until later June or almost July, and that's months from when your debts were discharged. I'm pretty sure it's yours.
Once a chapter 7 bankruptcy case is closed can the trustee order the debtor to relinquish their tax refund if not ordered prior to closing?
I would think that to be highly unlikely. Once a case is closed, the Trustee has filed all the proper paperwork and the case is set aside, usually permanently. Unless there is… substancial fraud involved on your part and the Trustee gets wind of it, I'd think you are safe.
Answer . \nA tax refund is considered income/asset belonging to the BK petitioner and is therefore subject to seizure for the repayment of debt.\n. \nWhether or not the r…efund can be included in the BK depends upon the time frame of the BK filing vs. the tax refund date and amount, the status of the refund (joint, subject to child support action, etc.) and so forth.
Your chapter 7 bankruptcy was discharged in your favor and you are awaiting closing What will happen to your tax refund for this year if nothing was stated on your discharge about courts keeping it?
depends on the amount over $1000.00 money gone !!!!!!!
This question comes up a lot. It seems the answer really is it depends: mainly on how much and very importantly, if your earnings/overpayment of withholding relates more to… Pre petition or post petition time. (In other words, if you filed BK in say December and the refund you get a few months later is for that Jan - Nov pre -petition period...it would be something for you creditors. Opposite if your filing was say in February...especially if you didn't work/earn much in the Jan/Feb period.) In any case, it is absolutely reportable. . Tthe portion to be taken by the trustee should be the part relative to before the filing. Follow: Pre petiton assets and liabilities are in the BK. Taxes withheld from earnings are basically money put on deposit with the government, to pay the tax due/payable later on. Just like any other "savings" account. Had you had the 'correct" amount withheld (instead of too much, causing a refund), the additional you received would have been available for to pay those creditor/debts. Earnings (and hence tax overpayments) from after the filing are not part of the BK.. And finally, please understand all BK is a Federal court action...your state has little to do with it....that may just be the name of the Federal Court District, of which there can be many, in your area. Yes, some of these districts have certain rules they hold by, to facilitate the cases they hear (like in AZ, which is a community property state - they would try to use those rules for definitions), but the actual process, etc. is entirely Federal Law and unchanging.
If you live in a community property state and only your husband files for bankruptcy and you file your taxes separately can the bankruptcy court take your portion of your tax refund?
Yes, unless you also file papers for an "Injured Spouse" which may or may not relieve you also of the tax burden.
Until discharge. (The length of the ch 13 plan.) Speak with an attorney about your specific situation. If you can not find an attorney, contact your local Bar association a…nd they will refer you to one.
Presuming not a community property state and only one of you filed BK? The part that can be shown relevant to the non-BK spouses earnings and overpayment would be exempt fr…om claim. (If that person didn't contribute to the overpaid withholding, they probably wouldn't be deemed entitled to a refund).
If your business is a separate corporation or entity, no.
No! You must claim more dependants on your paycheck to avoid the trustee claiming your refund. 1500$ is the limit from Fed and State combined. Keep your refund below that amou…nt combined and you will be in the clear. I find it ironic that if you owe the irs any money the trustee does not help out with that but if your refund is good then the trustee will claim it. Hope this helps!
I know Ohio is an exceptionally sepcial place...able to make laws to control the debts and contracts you have with people and business all over the country! Sure the name on t…he buidings your having all this done in don't say FEDERAL?
Yes unless it is Earned Income Credit.
The court can of course....you have placed all your financial affairs in their hands.. And cosider, if the refund is for over withholding from work you did in 2008, and you d…idn't file BK until 2009...that is prepetition money and rightfully should be used to pay your Pre P creditors.
Usually not. Your bankruptcy petition will ask you for information on whether or not you received a tax refund for the year prior, but they don't usually track you afterwards …to find out if you got a refund after your discharge. You are applying for a clean financial slate, and taking away your refund would negate that purpose. If in doubt, check with your bankruptcy attorney for more clarification.