QUESTION

I filed a Chapter 7 in October of 2011.My attorney assured me at the time of my consultation that my income taxes will not be taken nor touched.

Asked on Feb 23rd, 2012 on Bankruptcy - Missouri
More details to this question:
In November, i went to the 341 meeting and the trustee had a form for me to sign, stating that i would provide my 2011 taxes when they are available. I was completely in shock, because i was assured that i would be ok. I asked my attorney about it, & he again assured me that, i will be fine since i filed a chapter 7. A few weeks ago, i received a letter from my attorneys office stating that "if my refund is similar to the one that i received last year"(which it is), "then they will administer it to my creditors." I have made many attempts to contact my attorney & the response that i am receiving is from his paralegal which is out of state. She only advised me to not spend the refund, which i have not done. She also has told me several different stories about how the trustee will not touch my refund.I am very disappointed & i do not know what to do from this point!!
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1 ANSWER

William/J Joanis
To the extent a tax refund is accrued during the year of filing it is property of the estate.  So, if you file mid year, on half of your refund will go to the estate.  If you file after 2/3 of the year, 2/3 is property of the estate and 1/3 is simply yours.  In Missouri,  you have a small amount of property, such as cash, stock, tax refunds, property that exceeds dollar limitations (such a cars that have equity that exceeds what your state law allows as exempt; $3000 in MO).  This is a "wild card" exemption.  The "wild card" is a pretty low amount in MO.  Without knowing more, it is hard to know if your tax refund would have fallen within your available wild card exemption amount.  It is also hard to know what your layer could have done to protect your refund.  It sounds like your lawyer did a bad job of warning you about the tax refund.  It is hard to judge from afar whether there is anything that your attorney could have done to protect the refund.   It may be a case of "no harm no foul."  But also very disappointing communications.  (Frankly, you should have had all of this explained to you by your lawyer before you filed.  I would hate for one of our clients to feel so confused.  I would also feel bad if our clients could not get a straight answer from us.  I guess we are just old school.)
Answered on Feb 23rd, 2012 at 8:04 PM

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