QUESTION
Will I lose my tax refund after filing chapter 7 bankruptcy?
Asked on Jan 25th, 2013 on Bankruptcy - Michigan
More details to this question:
I filed chapter 7 bankruptcy on 7/24/12. My husband did not file bankruptcy with me, as all of my debt was accrued before we were married. Today, we went prepared our 2012 tax return jointly. My income for last year was approximately $2100, as I typically stay home with our son and only work occasionally. I paid $0 in federal payroll taxes last year. My husband made approximately $38,000. Our expected refund is $2700. We claimed our son, got earned income tax credit, and the saver's credit. Will our tax refund be taken by my trustee, even though I contributed absolutely no federal tax last year?
9 ANSWERS
Bankruptcy Law Attorney serving Austin, TX
at
Law Office of Susan G. Taylor
Update Your Profile
I assumed you were discharged in bankruptcy and your case was closed. It's over no one will take your income tax refund.
Answered on Jan 31st, 2013 at 1:58 PM
Daniel James Wilson
If you filed in July of last year you have already had your meeting of creditors. If the trustee did not ask you to turn over your return for 2012 when it is prepared he is probably not going after your refund. The earned income credit is exempt. You are probably good to go!
Answered on Jan 30th, 2013 at 7:50 PM
In all likelihood you will lose the tax refund in these circumstances if the Trustee asks for it. You probably should consider amending your tax returns to file separately.
Answered on Jan 28th, 2013 at 1:19 PM
The Trustee is entitled to take a portion of your tax refund that is not exempt. Since your spouse didn't file with you, the Trustee is only able to claim 1/2 of the refund, and since you filed bankruptcy just over halfway through the year, the Trustee can take a little more than 1/2 of your share of the refund. In Nevada, Earned Income Credit is 100% exempt, so if you claimed this exemption on Schedule C, there should be virtually nothing for your Trustee to take. In any event, your share of the tax refund may be too small for the Trustee to use, but it is not your decision to make. Send the return to the trustee and ask whether or not s/he needs the refund check. Your argument that you didn't contribute to paying the taxes is irrelevant in this situation.
Answered on Jan 28th, 2013 at 1:19 PM
Deborah F. Bowinski
If you signed a Stipulation with your trustee to provide copies of your tax returns you must comply with that requirement. In Colorado, earned income credits are exempt and protected from your trustee. Most trustees will allocate a refund based upon the proportionate earnings of the spouses so it sounds as though at least most of the refund would be protected.
Answered on Jan 28th, 2013 at 1:18 PM
Chapter 7 and Chapter 13 Bankruptcies Attorney serving Dublin, OH
at
Granger Law Firm LLC
Update Your Profile
The Trustee has a right to take certain portions of your refund. The Trustee can only take the portrion of the refund that is attributable to your income or taxes you paid in. The Trustee cannot take the portion attributale to your husband if he did not file- the Trustee will want to see W-2s so they can determine the difference. Additionally, the Trustee cannot take the portion of the refund that is from Earned Income Credit or Additional Child Tax Credit (but can take the original Child Tax Credit Portion). It is unlikely that the Trustee would persue the refund based on the cicrumstances below but you will need to get your tax return to the Trustee once it is prepared to be sure.
Answered on Jan 28th, 2013 at 1:18 PM
Richard hirsh
This is a very hot topic in bankruptcy practice. The prevalent view appears to be that the tax refund, even if it is on a joint return, belongs to the spouse who actually earned the income and paid the tax. In your case it was your husband whose income was taxed and presumably he paid the tax from withholding. Ultimately that concept should prevail in your case.
Answered on Jan 28th, 2013 at 1:18 PM
Estate Planning Attorney serving Wilmington, DE
at
Reger Rizzo & Darnall, LLP
Update Your Profile
It depends on how much assets you have for the personal exemption. Each person is entitled to keep $25,000 personal exemption so if you do not go over that, you should be able to keep tax refund.
Answered on Jan 28th, 2013 at 1:17 PM
That is hard to say. Did your attorney exempt the potential refund? In other words did he list it as an asset? If he did, your refund is not at risk. If he did not, at least part of it (if not all of it) is at risk.
Answered on Jan 28th, 2013 at 1:17 PM