Can I keep my tax return if I file bankruptcy? 31 Answers as of January 09, 2013

My wife and I will file bankruptcy next year and I'm curious what sort of timing to do it in. If we file after I submit the taxes, before we get the return, can we keep the return? How does it work?

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Joseph Lehn, Esq
Joseph Lehn, Esq | Lehn Law, PA
First of all, your tax refund is considered an asset. However, any and all earned income portion (EIC) is exempt and can not be taken by your trustee. Every individual filing bankruptcy receives $1,000.00 exemption for personal property and, if they are not exempting a house, an additional $4,000.00. These exemptions can be used to exempt and thereby, keep the tax refund. If the value of your assets is more than the exemptions you have available, you may not have any more exemptions to use towards the tax refund. In that case, the trustee will retain their portion of the tax refund. If you feel that you may lose the tax refund, you may want to receive and spend your tax refund prior to filing your bankruptcy petition. Just be sure to not pay any friends, family or other creditors and only spend it on necessary and reasonable expenses.
Answer Applies to: Florida
Replied: 1/9/2013
Charles Schneider, P.C.
Charles Schneider, P.C. | Charles J. Schneider
You mean your tax refund? Yes if it falls within your wild card or other exemption amounts.
Answer Applies to: Michigan
Replied: 1/4/2013
William C. Gosnell, Attorney at Law
William C. Gosnell, Attorney at Law | William C. Gosnell
No unless you have space under your personal property exemption.
Answer Applies to: Tennessee
Replied: 1/4/2013
Stephens Gourley & Bywater | David A. Stephens
Generally in a chapter 7 the trustee will take the next year's tax refund if it is very large. If you file early in the year you lessen the chance of it being taken. In chapter 13 the refund is almost always taken.
Answer Applies to: Nevada
Replied: 1/4/2013
Serenity Legal Services
Serenity Legal Services | Arnold H. Wuhrman
California law allows you to keep certain property when you file bankruptcy you get up to $23,000 in exempt property under one set of rules, or up to $100,000 in equity in your home under another set of rules. Your tax refund is property at the time you file bankruptcy even if you haven't received it yet so it's one of the things you can use your exemptions on if you wish, and if you have enough of the $23,000 limit to spare for it.
Answer Applies to: California
Replied: 12/31/2012
    R. Steven Chambers PLLC | R. Steven Chambers PLLC
    Tax refunds are considered property of your estate, meaning they are available to the trustee for a distribution to creditors. The portion of the refund that the trustee is entitled to depends on when you file and whether you have received your refund for the prior year (and spent it). For example, today is December 31, 2012. If you filed today the trustee would be entitled to all but one day's worth of your 2012 tax refund. The law presumes that the refund is pro-rated evenly throughout the year. So if your refund for 2012 was $2,400, the law assumes you are entitled to $200 for each month of 2012. If you file in 2013 any time before you receive your refund and spend it the trustee will be entitled to all of your 2012 refund PLUS he is entitled to a pro-rata portion of any refund you might get for 2013. In practice if you file in the first quarter of the year the trustees often don't make a claim to that year's refund. So, for example, if you filed on March 31, 2013, and had already received and spent your 2012 refund, there is a good possibility the trustee would not make a claim to the one-fourth of your 2013 refund he would be entitled to. When it comes to taxes and tax refunds your best bet is to contact an experienced bankruptcy attorney.
    Answer Applies to: Utah
    Replied: 1/3/2013
    Debt Relief Law Center | Roger J. Bus
    You can usually exempt your tax refunds per 11 U.S.C. 522(d)(5)- in other words- you are allowed to keep them if your attorney properly exempts all refunds.
    Answer Applies to: Michigan
    Replied: 1/3/2013
    Law Office of D.L. Drain, P.A.
    Law Office of D.L. Drain, P.A. | Diane L. Drain
    It depends on when you file your bankruptcy. Normally it is best to wait to receive and spend your refunds before filing the bankruptcy. But, that may not be the best for you, depending on your unique circumstances. Please understand that bankruptcy is a very complicated process. It is wise to talk to an experienced bankruptcy attorney before deciding to take this important step.
    Answer Applies to: Arizona
    Replied: 1/2/2013
    Dan Wilson Bankruptcy
    Dan Wilson Bankruptcy | Dan Wilson
    If you can wait to file until after you receive your refund and spend it you should. Tax refunds are non-exempt property that the trustee will take. Exception is for Earned Income Credit and Child Tax Credit of line 50 of form 1040, which are exempt.
    Answer Applies to: Colorado
    Replied: 1/2/2013
    Moffa & Bonacquisti, P.A.
    Moffa & Bonacquisti, P.A. | John A. Moffa
    NO. You would lose most of it even if you filed right now (before the end of 2012). An experienced attorney could help you maximize what you can do or keep.
    Answer Applies to: Florida
    Replied: 1/3/2013
    Law Office of Jeffrey Solomon
    Law Office of Jeffrey Solomon | Jeffrey Solomon
    The right to receive the next tax refund is an asset that could be taken by a trustee. If you are going to file a chapter 7 in 2013, you would typically want to wait until you receive and legitimately spend your refund. You should consult an attorney about your specific case.
    Answer Applies to: Florida
    Replied: 1/2/2013
    Danville Law Group | Scott Jordan
    You will need to exempt the tax return in order to keep it. Schedule B is where you list tax returns. Schedule C is used to exempt property you want to keep, with certain limitations.
    Answer Applies to: California
    Replied: 1/2/2013
    J.M. Cook, P.A. | J.M. Cook
    You will need to exempt your tax refund using your state exemptions.
    Answer Applies to: North Carolina
    Replied: 1/3/2013
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    If you have enough cash exemptions then you are allowed to keep it, you should ask your attorney.
    Answer Applies to: New York
    Replied: 1/3/2013
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    A great way to lose your refund is to file pro se. Use a lawyer. A good lawyer can time your case to properly protect some or all of a refund.
    Answer Applies to: Georgia
    Replied: 1/3/2013
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    Keeping the refund will depend on how much it is going to be and what other assets you have. You might want to speak to an experienced bankruptcy attorney so you can be sure the refund is safe. If it is, you can proceed right now; if not, you might want to wait on the filing until you have received the refund and expended it.
    Answer Applies to: California
    Replied: 1/3/2013
    Richard B. Jacobson & Associates, LLC | Richard B. Jacobson
    I assume you are referring not to your tax return but to an anticipated refund. The answer depends on whether you choose the Wisconsin or federal list of exemptions, the size of the refund, and what other property apart from the refund, you might need to exempt under the 'wild card.' Consult a skilled bankruptcy lawyer.
    Answer Applies to: Wisconsin
    Replied: 1/3/2013
    Ross Smith, Attorney at Law
    Ross Smith, Attorney at Law | Charles Ross Smith III
    This is more complicated than you imagine. Yes, you can wait until you get your refund back in early February and spend the refund before you file. But you will have to spend it it on the correct sort exempt items. For example, you can spend it properly on: 1. Attorney fees. You should have guessed that. 2. Clothes for you and your dependents. Make sure that they are not worth more than $550 on Craig's list after you buy them. 3. Furniture for you and your dependents. Make sure that they are not worth more than $550 on Craig's list after you buy them. 4. Car repairs. (Be careful not to make the value of the car more that $3,450 ) 5. Utilities. 6. Arrears on car loans and mortgages. DO NOT PAY DEBTS TO RELATIVES. Remember, in Ohio you can keep $450 in cash and the right to receive cash. On top of that you can select $1,150 in any other property you want. You want to keep the your cash refund. If you are married and your spouse made wages that contributed to the refund, then you can double these two exemptions. You can also keep any amount of your refund that due to your "Earned Income Credit" for the kids, if you qualify for that credit. I think that your best course of action would be to take your refund and pay an experienced bankruptcy attorney to file for you. That's the safest course for you and your family. You need to be out there scuffling for a job, not trying to figure out how to file a Bankruptcy. Good luck.
    Answer Applies to: Ohio
    Replied: 1/3/2013
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    Unless the tax refund is eligible for an exemption under state law, it will have to be turned over to the bankruptcy trustee to be used to pay your debts. The timing is important, but not in the way you are suggesting. Unless you have received the refund and spent the money appropriately before filing bankruptcy, the refund will not belong to you when you file bankruptcy. Contact a local bankruptcy attorney for further information and to protect the refund once you do receive it. Best regards,
    Answer Applies to: Nevada
    Replied: 1/3/2013
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    This depends on how you can best maximize your "exemptions." Some property is entitled to be claimed as "exempt" - which means you get to keep it. Without knowing what else you own I can't answer this. This is where most in pro per debtors make mistakes. You should see a lawyer.
    Answer Applies to: California
    Replied: 1/3/2013
    Kenneth A. Parker, P.C.
    Kenneth A. Parker, P.C. | Ken Parker
    It depends on the type of Bankruptcy you plan to file: Chapter 7 or Chapter 13. If you are planning on filing a Chapter 7, then you could file now and keep the refund IF you have available exemptions to exempt the refund from your bankruptcy estate. If you plan on filing a Chapter 13, most Chapter 13 Trustees require tax refunds to be paid into the Chapter 13 repayment plan, so you may want to wait to file until after you receive the refund. Call a Bankruptcy attorney and get a consultation. Most will offer a free consultation like I do.
    Answer Applies to: Georgia
    Replied: 1/3/2013
    Ken Love Law | Kenneth Love
    You can keep your tax refund is the amount is exempted under North Carolina law.
    Answer Applies to: North Carolina
    Replied: 1/2/2013
    Law Office of Michael Johnson
    Law Office of Michael Johnson | Michael Johnson
    It depends It matters on your case facts in regards to your exemptions allowed and type of taxes. Your should consult with an attorney to discuss the facts.
    Answer Applies to: Florida
    Replied: 1/2/2013
    Law Office of Stuart M. Nachbar, P.C.
    Law Office of Stuart M. Nachbar, P.C. | Stuart M. Nachbar
    IN NJ; you can keep it if you do not owe back taxes and properly exempt it out.
    Answer Applies to: New Jersey
    Replied: 1/2/2013
    Orrock, Popka, Fortino, Tucker & Dolen
    Orrock, Popka, Fortino, Tucker & Dolen | Myron Wayne Tucker
    Whether you can keep a tax refund or not depends on what type of bankruptcy you file, the amount of the refund, and your ability to protect it through exemptions. Generally, in a Chapter 7 bankruptcy, unless you have significant equity in real or personal property, you would be able to exempt the refund, which means you could keep it. During the first 5-6 months of every year, the bankruptcy Trustee will be asking if you received or if you are expecting to receive a refund. If you are unable to exempt it, you will be asked to account for it if you already received it or to turn it over if you are waiting to receive it. The most correct answer to your question would require an analysis of your particular financial situation. In a Chapter 13 bankruptcy, you are expected to turn over your tax refund to the trustee every year you are in the plan unless your confirmed plan is a 100% plan. A 100% plan means that even without additional funds such as tax refunds, the unsecured creditors are being paid 100% of their claims.
    Answer Applies to: California
    Replied: 1/2/2013
    Law Office of Asaph Abrams
    Law Office of Asaph Abrams | Asaph Abrams
    A deposited, cashed, or pending tax refund (including refunds from the present/past tax period(s), for which a return has not yet been filed or hasn't come due) is an asset (property). In chapter 7 bankruptcy, property can be exempted (protected) up to a specified limit. San Diego bankruptcy debtors (and other California debtors) are usually entitled to sufficient exemption allowances to cover their tax refunds.
    Answer Applies to: California
    Replied: 1/2/2013
    Richard L. Hirsh, P.C. | Richard L. Hirsh
    If you have a tax refund pending when you file for bankruptcy, the trustee will have the right to claim that refund unless you use your "wild card" exemption to declare that refund as an exempt asset. Without knowing the amount of refund you might get, it is difficult to determine how much would be exempt however the maximum wild care exemption for a married couple fling is $8000. There might be other factors which might affect this scenario but you give no other information.
    Answer Applies to: Illinois
    Replied: 1/2/2013
    Attorney at Law | David Holbrook
    It depends on the amount of the refund and other property you own. Talk to a BR lawyer.
    Answer Applies to: Georgia
    Replied: 1/2/2013
    Lynn Boak, Attorney at Law P.C.
    Lynn Boak, Attorney at Law P.C. | Ethelyn (Lynn) Boak
    Part of your tax refund will become part of the bankruptcy estate and the trustee will use it to pay creditors. This is because the refund represents income that you earned during the year prior to filing bankruptcy. The timing of your filing makes little or no difference in how much the trustee will keep.
    Answer Applies to: Wyoming
    Replied: 12/28/2012
    The Smalley Law Firm, LLC | Cary Smalley
    I would recommend filing bankruptcy after you have received and spent your refund on ordinary household expenses to avoid any difficulties.
    Answer Applies to: Kansas
    Replied: 12/28/2012
    Colorado Bankruptcy Law Group, LLC | Peter Mullison
    Tax refunds are generally not protected when you file bankruptcy in Colorado. The only way to avoid having it taken by the trustee is to file your return and spend the refund in an appropriate way before you file bankruptcy.
    Answer Applies to: Colorado
    Replied: 12/28/2012
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