I understand the above. Will have just a small return coming next spring, so would like to file now as you said it takes about three months? Then I could file for 2009 nine after that time, but before the April deadline. Correct?

Lynn, you need to consider that by filing bankruptcy late in 2009, the trustee in bankruptcy may be able to take most of your 2009 tax refund and make it a part of the bankruptcy estate for the benefit of your creditors. Read the newly-expanded article above and I think the issue will be clear to you.

I have retained a bankruptcy attorney, and have made my final payment to him to retain his services, but I haven't finished all the necessary paperwork he has requested, so I assume he hasn't officially filed bankruptcy for me just yet. I am expecting to receive a $4500 federal tax return next week. Most of it comes from having purchased a home in January of 2009 and getting some of the interest back, as I understand it. Do you think this refund is safe from my creditors because I haven't officially filed for bankruptcy yet? I am depending on that money to help me pay my mortgage after I get laid off from my teaching job (which I got the notice for 2 weeks ago). Thank you for your time.

Krista, on the limited facts available, your tax refund itself seems safe if it arrives before filing. You would also need to use it in a "permissible" way, meaning a way that makes it not available to creditors (like paying your mortgage), before filing. BUT, this is something that you should ask your own bankruptcy attorney who knows your situation in much more detail than I do.

I have read the above article but want to make sure i am correctly applying it. I had 0 income prior to filing my ch 7 in march 2009. I finally got a job in may 2009 and had the bk discharged in june 2009. I just recvd my tax return. Will it then be pro-rated for 3 mos or am I at a loss of the entire check? All income was received/earned after the filing. Also what happens if you do not send the check in to the trustee ? Thanks

Sharon, from the facts you stated, I don't see that you owe the trustee anything. When you filed your Chapter 7 in March 2009, it would have been the tax refund you were owed (if any) from your 2008 tax return that the trustee would have been interested in and that would have already been taken care of before your discharge. Anything you earned after filing the Chapter 7 is yours to keep. The only thing you were "on the hook" for after filing Chapter 7 was income received from the death of someone (inheritance or life insurance proceeds) for 180 days. You're in the clear!

If a person filed a Chapter 7 in 2009 and received a discharge in 2010 before filing the 2009 tax returns – then received a federal refund that was only for Earned Income Tax Credit – no income tax was paid in during 2009 from employment and there was no income tax due for 2009 due to the standard deduction and exemptions – would that refund of the Earned Income Tax Credit be available to the Trustee or can the debtor keep it?

Rob, I'm going to give you an "it depends" answer but it's really because there is no definitive answer. The answer is it depends on the particular court and trustee. Different courts have held both ways and the trustee may or may not claim that it's part of the estate. If the trustee does claim that credit, then you and your attorney would have to litigate the issue with the judge if you want to keep it away from the trustee and, as I said earlier, judges in different courts have held both ways.

I filed for chapter 7 bankrupcy but haven't been discharge yet. Will my tax refund go to the trustee or will i keep it. I am planning to file my taxes in the coming weeks.

Tobey, the answer to your question is "it depends". Did you include the tax refund in your filing as an asset and also exempt it? If so, you can keep the refund. If not, the trustee may be able to take it for your creditors. You should ask the bankruptcy attorney you used to prepare and file your case; he/she would know the required details of your filing.

Hi Malcolm, I went to court with the trustee on 1-7-11 went well no issues. Suppose to discharge on 2-11-11. But I want to file my 2010 taxes today I need the money ASAP will I be ok or will the trustee take my tax refund. Please advise I would greatly appreciate it.

Sincerley,
Julio

Julio, I'm not your bankruptcy attorney and don't know what is in your filing. If you listed the refund as an asset and also exempted it, there should be no problem. If you didn't do that, then the trustee could take your refund. If the latter is the case, you should tell your bankruptcy attorney about your refund and see if there's time to file amended schedules to list and exempt it.

already filed chapter 13. Filed 8/20/2010 and discharged 9/24/2010 with a payment plan of 780.00. I keep reading about all the tax refunds and whether they will keep them or not. I am expecting about $7000 refunds from federal and state for the 2010 tax year. Will the trustee get this? How do know if my attorney listed my previous 09 refund as an asset and also exempted it? I really hate to call him as he was not the most patient attorney someone could have …just kind of rude and nasty actually. So I thought I would ask you…thanks for any info

Teresa, I'm going to assume that you meant "the payment plan was confirmed 9/24/2010" instead of "discharged 9/24/2010". Most importantly, the handling of tax refunds in Chapter 13 cases varies greatly with the particular federal court district and trustee. My article "Are you expecting a tax refund?" specifically refers to Chapter 7 cases because of that. In Chapter 13 cases, it's common for the plan to contain language specifying the treatment of tax refunds. I'm sorry you hate to communicate with your own attorney, but that really is the only good course for you. He would know the language of the plan and also the practice of your court and trustee.

My husband and I just filed for Chapter 13 protection to keep our home due to a failed loan modification with BOA. Most of our tax return is from the Earned Income Tax Credit not due to overage from not enough money being taken out for taxes. Is the trustee entitled to take this for debts owed or can our attorney write language in the bankruptcy to allow us this earned income credit, after all, this refund is not income earned

Yolanda, please see my reply-comment above (May 15th, 2010 at 9:39 pm) which mainly says that it depends on where you are because different courts have held both ways about the Earned Income Tax Credit.

My husband and myself had our bankruptcy discharged on dec 7 2010. Our attorney never mentioned our tax refund in our paperwork. We have filed our taxes already, is there anything I should worry about. We have that money slated for dental work we need done.

Cindy, I wish I could give you a definitive answer but I can't since I know nothing about your filing schedules or the practices of bankruptcy trustees in your particular court. You need to ask your bankruptcy attorney about that.

I filed for Chapter 7 on 2/11/11, but have not yet filed by 2010 tax return. Trustee (under the Rules want a copy of my tax return for the tax year immediately prior to the year of my BK filing. Am i required to file my return (even if I don't have all my documentation yet) just so I can give him a copy of my 2010 return. I have filed for all prior tax years. Also, my 2009 tax return was very late due to some significant short sale issues that delayed my accountant in completing the return. I am getting a refund for 2009. Is a 2009 tax refund something that must be included for a 2011 BK filing? Thanks,

Russell, here's how I see it with the information I have.

- Where I practice, the trustee must be sent a copy of your last-filed IRS tax return, which for you would be the 2009 return.

- Since it's now 2011 and tax refunds for 2010 taxes are coming in, the trustee may require that you file your 2010 tax return so he/she can see if you're getting any refund for 2010 taxes. Is that true in your case?

- What documents must be given to the trustee varies a lot in different courts and trustees.

- All amounts currently owed you, including a 2009 tax refund, are assets of yours and must be included in your bankruptcy filing. To protect assets from the trustee and your creditors, you must "exempt" them under your state exemption laws.

I hoped that helped.

So under my circumstances, and assuming we will receive a 2010 tax refund, the trustee could get his hands on two years of tax refunds, since they did not come in prior to this time?

And I read somewhere that the trustee can make a determination whether or not to collect and use the tax refunds based upon the amount of the refunds and how much of a percentage they are of the otherall dischargeable debts. If he feels that the refunds would not make a significant impact, and they could be used to get us back on our feet, he could just waive collecting them. In my case the total may only be around 9K total, but I have over 225,000 in dischargeable debt, so it is not going to make a significant impact.

Russell, what you say is true in general, but it's still up to the trustee to determine for each particular item if he'll take a non-exempted asset. We can only take a calculated guess ahead of time.

>the trustee could get his hands on two years of tax refunds<

Yes, if those refunds were not properly exempted in your Chapter 7 filing, because you were owed that money at the time you filed and therefore they were your assets at that time.

My wife and I filed Chapter 7 on 5/29/2010 in order to save our house from Wells Fargo Home Mortgage, who approved our home loan modification, then filed a notice of sale. Our Chapter 7 was Discharged 10/09/2010. Th bankruptcy forced Wells Fargo Home Mortgage to negotiate with us and we got our home loan modification done and we saved our home.

Now I am filing our 2010 tax return and we expect approx $7,000 refund. I received a letter from our bankruptcy trustee stating that we must send her any 2010 tax refund check or she will "unwind" our discharge.

Do we have to send her our 2010 tax refund? Can the trustee undo our entire Chapter 7 if we don't send her our 2010 tax refund check?

Thanks in advance for your response. In 2011, my wife and I have now both lost our jobs and need the refund to eat!

David, if you didn't list that tax refund (which was partly created by tax deductions prior to your filing) as an asset on your schedules and also exempt it, the trustee may be able to take it or, more exactly, take the amount of the refund that was caused by your earnings and deductions prior to your filing. If you had a bankruptcy attorney handle your case, you should contact him or her immediately. If you prepared your own filing, I urge you to quickly retain an experienced bankruptcy attorney in your local area. It may be too late because your case is already closed, but do get the opinion of an experienced bankruptcy attorney in your local area.

Malcom, I had filed Chapter 13 in November 2010 and the plan was finally confirmed in March 2011. The Chapter 13 requires the tax refunds to be turned over to them if I get a tax refund. Although they are asking for the Federal Tax Return to be submitted once they are filed, does this mean I only have to give them my federal tax refunds if I am getting a refund? What about the state tax refund? It was never mentioned in the plan confirmation. From your experience, do you know how do they obtain the refunds? Do I send them the check or it is automatically taken from the IRS to the Chapter 13 Trustee? I recently e-filed my tax returns and state already direct deposited the refunds to my account. I can't seem to get a clear answer on this. Thank you!

Kyle, I'm going to have to give you an unsatisfactory reply because it really depends on the practice in your jurisdiction. You should ask your own bankruptcy attorney that question or, if you filed your own case and don't have a bankruptcy attorney, I recommend that you retain an experienced one in your local area to help you through the remainder of your Chapter 13 case.

We filed our bankruptcy on 4/25/11 our 341 meeting with trustee is on 6/28/11 he sent us a letter asking for 2009 and 2010 tax returns with details of what we spent the money on.Is he going to hold it against us of what we spent the money on and how detailed?

Nicole, it's standard procedure for you to send the trustee, prior to your 341 hearing (creditors meeting), your last-filed IRS tax return. Assuming that you filed your 2010 return, the trustee is also asking for your prior year return. I also assume that you mean that that you received a tax refund for one or both of those years and he's asking what you did with that money. I can't be sure what he's looking for, but in general he'd be looking for attempts to conceal assets such as giving money to relatives for safe-keeping, "buying" something with the money without that something being worth the money given for it, etc. You should ask your bankruptcy attorney about this.

Good luck to you,

Malcolm

Before I actually filed I had to get all my bank statements etc for attorney.Does that also go to the trustee once we have filed?

They go to the trustee if the trustee requests them.

TishMay 27th, 2011 at 2:29 pm
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We filed bankruptcy on 10/29/2010. Our attorney told us to return any tax refunds received to the IRS/State and we do have back taxes. Our bankruptcy case was extended and the trustee assigned an attorney who is now asserting that we should turn over the refunds to the court as part of the settlement. What is the most likely outcome … will we have to pay the refund back to the court? … Or a pro-rated amount … Or because it would be applied to back taxes there is no consequence?

Tish, I don't know the details of your case so can't give you a specific answer to your question. In general, the trustee has a right to your tax refunds that were "earned" prior to filing bankruptcy and that were not exempted in your filing. You'll need to ask your bankruptcy attorney for more specifics about your case.

Thanks for your quick response, Mr. Ruthven. I also have a question about stock options – if I may. Does the trustee also have a right to stock which was not vested at the time of filing? In other words – for instance, stock that could not be exercised because it would not be vested for 3 years or only stock that was vested at the time of filing?

Hello Tish. Again, I'm going to have to tell you that I can't give you a specific answer. In general, the trustee steps into the shoes of the debtor and get the rights to assets that the debtor has at the time of filing. At filing, that unvested stock option was worth something at that time, and also there is good authority that the trustee gets any post-filing appreciation of an asset (like becoming vested). However, as usual, any asset (even one with an unknown value) may be exempted (kept from the trustee) if you have enough exemptions available. Again, you should ask your bankruptcy attorney about this matter because he/she knows the details of your situation and your filing.

Thank you again. We are in San Diego; I think you're in northern CA. If I am asked for a reference, though, from some friends up that way I will be happy to refer you.

Thank you, Tish, for the appreciation, and yes I'm in the San Francisco Bay Area. Glad to help.

I received a tax refund in July 2011 from 2010 taxes. Is that considered income for the means test because it's within the last 6 mos?

Zel, that's a question that different bankruptcy attorneys and different trustees give different answers to. My take on it is that a received income tax refund is not "income" of a kind to included included in the Means Test, but is instead a repayment of debt owed to the debtor by the government. In addition, the refund was not "income received" by the debtor on the date the refund was paid, but instead represented a return of excess withholding from gross wages which the debtor received when they were originally paid by his/her employer, some time earlier, before the six-month period. As I indicated, in some jurisdictions you may find resistance to those points of view.

Hello.
We filed Chapter 7 in June 2011. Our case was discharged and closed in September 2011. In February 2012, when we file our 2011 taxes, will the trustee get a pro-rated portion of the return?

Most of our return is made up of the Earned Income Credit (EIC) and Child Tax Credit as our business income lowers our AGI. Can the trustee take these credits?

thanks so much for any insight.

Stephanie, please see my reply-comment above (May 15th, 2010 at 9:39 pm) which mainly says that it depends on where you are because different courts have held both ways about the Earned Income Tax Credit. I expect that the Child Tax Credit would be considered the same way.

I filed for chapter 7 on 1/11/12 and will meet with trustee on 2/16. We plan on filing taxes on 1/18. Will the trustee take our refund? If so, should I ask my bankruptcy attorney to add the refund to the filing as an asset and exempt it if it wasn't done? Can this still be added even though it was already filed? What is a wild card exemption and can it be used for this?

Jill, without knowing the details of your situation and case, I'd assume your attorney included the tax refund as an asset and exempted it. If not, maybe he/she had a reason. And yes, in general you can amend your schedules after they are filed. In any event, you need to talk to your bankruptcy attorney about that issue.

The wild card exemption, if you're using the set of California exemptions that includes it, may be used for any assets including tax refunds. For information about the wild card exemption, see this article .

I filed Ch.7 on 10/18/2011 i have already had my 341 meeting and received papers from my trustee to turn over my tax refund what are the chances of him keeping it. I havent filed income taxes over a year because i was unemployed in 2010 the last time i filled was in 2009 i pay $150 a mth and i have no children and the state take the max out on me every pay period i did my taxes 1/14/12 and have a refund of 1200.00 will they take the whole check and i am current on my bankruptcy payments. I dont itemize nothing, dont own anything but my car that paid off.

Marci, your tax refund for 2011 taxes was "earned" in 2011 even though you don't receive it until 2012. Therefore at least part of it, the part earned before your filed Chapter 7 on September 18, was an asset, something you owned, at the time you filed. If you didn't "exempt" your tax refund in your Chapter 7 filing, the trustee can take at least the part of the refund that was earned before you filed the Chapter 7. You need to discuss this with your bankruptcy attorney.

Hello Malcom,
I am in a bad situation financially. I just completed my 2011 taxes, and will be getting back almost $8000. This will help. I am in NC, and was considering filing a Chapter 7. I plan to use my return to make living expenses and try to catch up on bills. Hopefully this will work. However, if I continue to struggle and decide to file for Chapter 7, will waiting at least 180 days to file my petition be deemed ok by court/trustee? I am not trying to abuse, but to stay afloat.
Thank you fo your expertise!

Hello Jeff,

I'm not clear what problem you foresee that you're asking about. If you get your 2011 tax refund before filing your Chapter 7, that money becomes just like any other money that you have and would need to be spent or, if you still have some, would need to be exempted in order for you to keep it. But do consider your possible Chapter 7 filing before you start to pay debts. If you file a Chapter 7 after paying significant money to your creditors, you would have pretty much wasted your in-short-supply money because those debts would be discharged in your bankruptcy. Do yourself a favor and consult with a qualified bankruptcy attorney in your area to explore your entire financial situation and possible options.

What I'm asking is that now that I filed taxes, and expect return in 2 weeks, if I go ahead and file Chapter 7, will I probably lose almost all of this return money to trustee? Or does it get exempted?
Also, if I do spend money on other things and living expenses (not unsecured bills), is there a certain amount of time that I would have to wait for the trustee not to be able to touch that money, or assume abuse?
Thank you again!

Jeff, whether your tax refund could be exempted depends on your other assets and the exemption laws of your state. This is not a subject to figure out yourself or with online help. I'll repeat my advice to consult with a qualified bankruptcy attorney in your area.

So we hired the Attorney, went to our meeting with the trustee in January and no one said anything about our tax refund. When we asked our Attorney before we filed he said it wouldn't be an issue. The trustee never mentioned our tax refund at the meeting and we received nothing in our paperwork about them. In March after we spent our $7800.00 refund on back taxes and catching up on current bills, we were informed that we must hand over the full amount or face dismissal on Chapter 7. I have no idea if there is anything we can do. Our lawyers says he is sorry and that we have 3 months to hand it all over.

Hello Dawn, I wish I had something encouraging to say but I don't. From your comment, it seems that you filed a Chapter 7 bankruptcy without listing your tax refund for 2011 as an asset (and also exempting it). That tax refund was "earned" almost all before you filed your case in December and therefore was almost all an asset of yours at the time you filed your case. Since you didn't bring it up at the creditors meeting and amend your schedules, now that the trustee found out about it without your help, it's probably too late to amend your schedules and keep the trustee from getting it. Again, I wish I had better news.