Can I keep my next year's tax refund if I file for chapter 7 bankruptcy this month? 22 Answers as of August 17, 2013

I need to file for chapter 7 bankruptcy because I have too much debt. I'm thinking of filing this month. I have jointly filed my tax returns with my wife since 2010 but I'm wondering if I will lose my future anticipated refund for next year if I file for bankruptcy this year.

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Law Office of Susan G. Taylor
Law Office of Susan G. Taylor | Susan G. Taylor
You won't lose it. But talk with an attorney. Chapter 7 trustees differ in their approaches in each jurisdiction, & the closer you get to January could affect the outcome. The greatest determining factor is the exemption scheme under which you file.
Answer Applies to: Texas
Replied: 8/17/2013
Law Office of Norman Moore
Law Office of Norman Moore | Norman P Moore Jr
A definite "probably". You need to exempt the pro-rated portion of next years anticipated tax refund. Assuming you have enough "wild card" exemption to cover this, you will be able to keep it.
Answer Applies to: Wisconsin
Replied: 8/17/2013
Law Offices of W. George Senft
Law Offices of W. George Senft | W. George Senft
The tax refund will be prorated and the trustee may claim a share of your tax refund depending on when you are going to file your petition. However, if you use the OR exemption laws, then you may keep the Earned Income Credit. If you use the federal exemption laws then possible you can pour over a significant part of the unused homestead exemption. The tax refund may not be an issue at all.
Answer Applies to: Oregon
Replied: 8/17/2013
Law Office of Thomas C. Phipps | Thomas C Phipps
The trustee may try to take your portion to pay creditors. If you really have to file bankruptcy, you may have to file it and take a chance at losing all or a portion of the tax refund.
Answer Applies to: Missouri
Replied: 8/17/2013
Law Office of Stuart M. Nachbar, P.C.
Law Office of Stuart M. Nachbar, P.C. | Stuart M. Nachbar
Not unless you owe taxes, and make the proper exemptions
Answer Applies to: New Jersey
Replied: 8/17/2013
    Portland Bankruptcy Law Group
    Portland Bankruptcy Law Group | Christopher J. Kane
    If you file Chapter 7 bankruptcy this year there is a potential that the Chapter 7 Trustee might hold the case open until you receive your tax refunds next year and, if they do, they could recover from you a pro-rated amount based on the number of days into the year you were when you filed the bankruptcy.
    Answer Applies to: Oregon
    Replied: 8/17/2013
    Law Office of Jeffrey Solomon
    Law Office of Jeffrey Solomon | Jeffrey Solomon
    The right to receive a tax refund is an asset that can be claimed by the chapter 7 trustee. For example, if you file bankruptcy on September 1, 2013, the trustee would have a claim for 9/12 of your 2013 tax refund when you file your return in 2014. The trustee could keep your case open until you file the return if the trustee believes that the refund could be large.
    Answer Applies to: Florida
    Replied: 8/17/2013
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    You can keep it as it probably is exempt. And a case you file now will be done by 4/15/2014
    Answer Applies to: California
    Replied: 8/17/2013
    R. Steven Chambers PLLC | R. Steven Chambers PLLC
    Tax refunds are always property that a trustee might take. The portion that the trustee takes is a pro-rata portion based on your filing date. For example, if you file on July 1, the year is half over so the trustee will take half and you will keep half. If you file on September 1, 243 days have passed since the beginning of the year so the trustee gets 243/365 and you get 122/365 of the refund. The only way to avoid this is to file your tax return as soon after the first of the new year as you can, wait to get your refund and spend it (you should talk to a lawyer as to how best to spend it), and then file bankruptcy in the first two months of the new year. In that way the trustee's portion of the refund due for the new year is so small that he might not claim it. Even this method isn't fool proof. On the other hand, just look at the refund as a cost of getting out of debt. In the long run you'll be thousands of dollars ahead if you file and get a discharge even if you lose all your refund. Take a long-term view instead of focusing on the short term.
    Answer Applies to: Utah
    Replied: 8/17/2013
    Law Offices of Patrick Edaburn | Patrick Edaburn
    You should be able to protect the tax refund with your exemptions but would need to review details with a professional.
    Answer Applies to: California
    Replied: 8/17/2013
    Law Office of Lynnmarie A. Johnson
    Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
    Yes, generally most people have enough exemption to cover their refunds and since it is only August, you have to exempt part of the year. Of course if you get a gigantic refund or have no wildcard exemption left(that's where refund/cash goes), then you could lose it. But I have only had one or two people that weren't able to exempt their refund.
    Answer Applies to: Michigan
    Replied: 8/17/2013
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    You will probably lose a part of it because the exemptions only allow you to protect the EIC portion of your refund and up to $1,000 in your wildcard. If your refund is relatively modest & your debts high, the Trustee may make the discretionary decision allowing you to keep all of it.
    Answer Applies to: Nevada
    Replied: 8/17/2013
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    It depends if the tax returns fall under your cash exemptions
    Answer Applies to: New York
    Replied: 8/17/2013
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    If you were to file relatively soon, no, your next tax refund would not be an issue, because at this point, you do not yet owe the government for 2013, and so there is no way they could owe you anything either. Were you to file the bankruptcy at some point after you had filed the 2013 return, and there was a refund owing you, that could be an issue, and even then that would depend on how big the refund was and what exemptions were available to you. Having said that, you absolutely should be consulting with an experienced bankruptcy attorney in person.
    Answer Applies to: California
    Replied: 8/17/2013
    Idaho Bankruptcy Law | Paul Ross
    In Idaho, exemptions only cover the Earned Income Tax Credit. The rest of the income tax refund is unexempt. Therefore, you must turn over your entire tax refund and the Trustee will reimburse any portion that is exempt or not part of the bankruptcy estate.
    Answer Applies to: Idaho
    Replied: 8/17/2013
    Mark S Cherry, Attorney at Law, PC
    Mark S Cherry, Attorney at Law, PC | Mark Cherry
    Next years tax refund would be post-petition and post discharge, and you can keep it.
    Answer Applies to: New Jersey
    Replied: 8/17/2013
    Porter Law Network | Karen Porter
    A chapter 7 bankruptcy case includes as property of the estate property you own on the date the case is filed and property that you acquire for 180 days after the case is filed. Your right to the tax refund arises after the tax year ends. If you are on a calendar year like most people, your right to a tax refund arises on January 1 of the next year. If you historically receive tax refunds that exceed the exemption of $4,000.00, that information needs to be included in your bankruptcy schedules. You have a realistic concern that warrants the assistance of an experienced bankruptcy lawyer.
    Answer Applies to: Illinois
    Replied: 8/17/2013
    David Andersen & Associates PC | Jeremy Shephard
    You possibly could lose a portion of your next year's tax refund. When you file a bankruptcy, any asset you have at the time of filing the bankruptcy is part of the bankruptcy estate. The overpayments of your tax refund up to the filing point would fall into estate property. (Example: It's the 100th day of the year when you file. You receive a $1,000.00 tax refund next year. 100 days/365 days in a year =$274.00 that is part of the bankruptcy estate). That means $274.00 is part of the bankruptcy estate and must be exempted in your bankruptcy or it technically must be turned over to the trustee. Many clients have enough exemption to protect their prorated tax refund and they don't have any problems. Talk to your bankruptcy attorney when you go to file.
    Answer Applies to: Michigan
    Replied: 8/17/2013
    Stittleburg Law Office
    Stittleburg Law Office | Bernd Stittleburg
    Your tax refund is safe if you file bankruptcy today. Generally, a Chapter 7 bankruptcy case will last approximately 3 months from date of filing until discharge. Next year's tax refund would therefore not come into play in your case.
    Answer Applies to: Georgia
    Replied: 8/17/2013
    Law Offices of Ezra N. Goldman
    Law Offices of Ezra N. Goldman | Ezra Goldman
    If you spend ten minutes with an accountant, all you have to do is adjust your withholding at work so you won't have a refund next year. That is the easy way. To be technical, you are not owed a refund until you file your taxes. Since you are filing bankruptcy now, you are not owed a refund yet so I doubt you would list it as an asset.
    Answer Applies to: Michigan
    Replied: 8/17/2013
    Stuart P Gelberg
    Stuart P Gelberg | Stuart P Gelberg
    You may lose about one half of one third if you can't exempt it. The trustee would be entitled to your portion of the refund attributable to Jan 1 to the date of filing.
    Answer Applies to: New York
    Replied: 8/17/2013
    Granger Law Firm
    Granger Law Firm | Katharine Granger
    Certain portions of your tax refund cannot be taken by the court- the Earned Income Credit and the Additional Child Tax Credit. Also, the court can only take the amount of refund earned up to the date of filing- so if you filed now, then the court could only seize the portion of the refund that is attributable to the 7 months you have worked so far. Finally, you are allotted a "wildcard" exemption which lets you keep $1100 of money, where ever it is, and this can be applied to your 2013 tax refund proceeds. Given all of the above factors, I would think it unlikely that you would lose your tax refund- but an attorney can review and tell you for sure.
    Answer Applies to: Ohio
    Replied: 8/17/2013
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