Will they take my tax refund? For how long if so?

[jlynnb21]

I heard that after you file for chapter 7, your income tax refund will be taken by the trustee. Me and my husband get a pretty big refund every year because we have kids, pay daycare, and don't make that much money. We dont have any assets to liquidate except for our house which we plan on giving up. We use out tax refund to pay our vehicle for the year so I'm worried about that.

[dogbone33]

I am in Ohio and pretty much the same. Kids, low income. They will take our return....

[TEW]

depends on how much you can exempt.
you may want to think about changing your w4 so you have money to live on and not let the government hang onto it all year

[HHM]

A tax refund is a cash asset, unless there is an exemption to cover it, then it would be non-exempt and the trustee can (and will) take it.

Bascially, if you want to use your refund; you need to file your taxes, get the refund, spend it, THEN file BK.

[jlynnb21]

so since we already spent the refund from our 2007 taxes and by the time we file our 2008 taxes the bk should be discharged we should be okay?

[HHM]

so since we already spent the refund from our 2007 taxes and by the time we file our 2008 taxes the bk should be discharged we should be okay?

Nope, the trustee is going to take your refund in 2008.

Let's back up an clarify the timeline.

For tax year 2007, you should have already received your refund if you filed your taxes by April 5, 2008

For tax year 2008, (the tax return is due April 2009), that refund is in jeopardy if you file your BK now. If you want to receive your TAX YEAR 2008 refund, you need to file your taxes, receive your refund, spend it, THEN file BK.

Right now, ALL the trustees are eyeing next years tax refunds. (after all, the refund is earned throughout 2008, thus, as an asset, it exists now. Thus, if you file BK, your tax refund that you would "receive" next year can and will be taken by the trustee unless you get it first and spend it or unless it is exempt.

[jlynnb21]

well my lawyer didnt tell me any of this. I'll have to ask, but that really sucks. The only thing we are going to discharge most likely is our house and maybe a sears card. everything else we are going to reaffirm. We have no other assets, no savings. we use the refund to pay ahead on bills. poo

[HHM]

Well, you should rethink reaffirming. There is almost no reason to reaffirm a debt, but that is a different thread. Do a search on the forum for Reaffirmation and read through some of those threads.

[Doghouse]

One of the things my lawyer told me when I said I had a big refund coming was the wild card exemption. In California can exempt up to 21K in tax refund and cash in bank.

[jlynnb21]

One of the things my lawyer told me when I said I had a big refund coming was the wild card exemption. In California can exempt up to 21K in tax refund and cash in bank.

I dont have any other personal property thats worth anything. Well maybe a TV and a washer and dryer so hoprfully they'll let us keep it. I'll be calling my lawyer on Monday.

[justbroke]

I dont have any other personal property thats worth anything. Well maybe a TV and a washer and dryer so hoprfully they'll let us keep it. I'll be calling my lawyer on Monday.

I believe the key to exempting a future tax refund, is to claim it on your petition when you file.

Lawyers will generally claim it as an asset. For example, "2008 Tax Refund" is what they put on Schedule B, and claim some State and/or Federal exemption to cover it. If there isn't a direct exemption, then they'll use part of the wildcard. The key is, you don't want to burn your wildcard exemption on your tax return, only to have real property taken away. You could even take what's left of your exemption and use it for a portion of your tax refund.

Say that you are single and that you used $15K of the California System II unused homestead exemption (on furniture, a car, etc). Say you are expecting a tax refund of $10K in April 2009. You can take what's left over of the unused exemption (about $6k) and apply it for the 2008 Refund. That means, the Trustee would get $4K, you'd get $6K. not bad.

Ask your lawyer about exempting a future return. if you're not exempting equity in a homestead (primary residence)... or don't have any equity in the homestead to exempt... try exempting the current year tax refund!

I've personally not tried this, but I hear that this is done often. I don't have specific information on any Districts.

[Mi Bankruptcy]

Our 341 is not scheduled until Jan 09. I am CH7 no asset. So, I don't actually know if this will work.

We had plenty of room in our exemptions and were well below the median for the size of our family and income. I told our attorney that I wanted our 2008 tax return exempted( filing in 2009). He said he wasn't worried about it because of where I was on the median and my exemptions. I told him I wanted it listed anyway. He listed it on

Schedule B
Anticipated 2008 Tax return $6,000

On Schedule C He listed:

He put "Anticipated 2008 Tax Return"
(Husb)11 U.S.C. 522(d)(5) $3,000
(Wife)11 U.S.C 522(d)(5) $3,000

[laurannm]

We filed in July (slightly above-median), meaning the trustee would have been entitled to 1/2 of our refund next year. We never exempted it, but did list as income (pro-rated) on our scheduled I. The trustee did ask us how much we expected to get next year (told him around $5k), but we never heard anything further and our case closed about a month ago.

[Never_Again]

The easiest way is to change the witholding and not get a refund. That is a pretty good practice anyways, bankruptcy or not.

It might be a bit late for that this year...