tax return and filing cha[ter 7

[mike258]

I am expecting a large tax refund, approx $6k, any day now. I know I can spend this on necessities, (auto repairs, dental work, groceries, etc.) but if spend all this money then file my chapter 7 soon after, will that bring up a red flag?

I can go through $6k in a few days if I need to. I mean a root canal and a crown will cost me over $2k. Auto repairs can be another $1k+ and auto insurance (up for renewal next month) is $1.2k

Should I leave some money for the trustee to take?

[TEW]

Nope spend every last dime.

[WillinVT]

Between State and Federal, my wife and I received close to $7000 back in February. At that time, we didn't know we were going to file, but with stuff we needed: ie: a new bed, stocked up on diapers, meat, toilet paper, paper towels and splurged a little, it didn't take long for that money to be gone.

Granted, we did go out to eat quite a bit, but it amazes me how fast we could get rid of that amount of money so fast.

I do have a little left over for my lawyer and filing fee's.

[mike258]

I was just concerned about getting a return, spending it in 2 days and filing a week later.

[willbfree]

Nope file and spend that refund. When done file your bk and sleep soundly at night. It's exactly what any atty would tell you to do.

[SCorpPain]

I am so confused about this tax refund issue. I'm in Colorado, have an S-Corp that is failing. Due to the losses in 2008 I will get a refund on my personal taxes. I filed an extension since the company return was not ready yet. I have the company return now and can file my personal return. I am in the midst of liquidating the business, then will file personal bk. Below is a question I sent to my attorney and his response.


Q. If I get my tax refund before filing can I keep it? I'm guessing that someone will nab it after the filing.

A. Refunds for the tax years that end prior to filing are property of the Bankruptcy estate, so you don't get to keep them, regardless of when paid.

Nope file and spend that refund. When done file your bk and sleep soundly at night. It's exactly what any atty would tell you to do.

[DebtEnder]

The only refund the TT will be able to get, if you spend down the 08 refund, would be a portion of the 09 refund, if any.

A refund is basically a no interest savings account. Just like with you cash in your pocket or in the bank account if you spend it before filing then it's not there to be taken. If you file a return and then file BK and then the refund comes in, then you basically keep a savings, non retirement account, open full of cash. And cash is the best thing a TT can hope for to give to creditors, no work involved and he gets paid

[MiSSMaGoo]

I received my refund 5 days before I filed bankrupt. I spent it all ($5000) and was so worried. Nothing happened at all - the trustee actually said I looked at your tax return and everything looks fine there and then I was pretty much on my way. When are you planning on filing? My friend filed last year in October and they took hers this year.

[MiSSMaGoo]

I am so confused about this tax refund issue. I'm in Colorado, have an S-Corp that is failing. Due to the losses in 2008 I will get a refund on my personal taxes. I filed an extension since the company return was not ready yet. I have the company return now and can file my personal return. I am in the midst of liquidating the business, then will file personal bk. Below is a question I sent to my attorney and his response.


Q. If I get my tax refund before filing can I keep it? I'm guessing that someone will nab it after the filing.

A. Refunds for the tax years that end prior to filing are property of the Bankruptcy estate, so you don't get to keep them, regardless of when paid.

I'm in CO too and spent mine with no problems whatsoever.

[SCorpPain]

I received my refund 5 days before I filed bankrupt. I spent it all ($5000) and was so worried. Nothing happened at all - the trustee actually said I looked at your tax return and everything looks fine there and then I was pretty much on my way. When are you planning on filing? My friend filed last year in October and they took hers this year.

I will probably file by the end of June, possibly in July, but likely June.

[JoeBankrupt33]

I'm in CO, I filed BK then filed taxes. He got it.

FILE TAXES FIRST. Any money you don't spend is cash that he can take also. Keep in mind that he can potentially take 6/12 of next year's refund if you file at the end of June, 7/12 of it if you file at the end of July.

If the trustee sees a 6000 refund for this year, he will likely estimate that you will get 6000 for next year, and he would want to take about $3000. This also means that he'll keep your case open until he gets your tax return next year.

Also, if your lawyer gives you a choice, file BK on the day after your pay period ends, regardless of when you get paid. If you do this, you will have $0 earned but unpaid wages. Plan your bank account to have near $0 on the day you file. This must be the actual balance regardless of what has cashed/not cashed. I know this is off topic, but I feel like I should pass on my relevant CO experience.

[SCorpPain]

I'm in CO, I filed BK then filed taxes. He got it.

FILE TAXES FIRST. Any money you don't spend is cash that he can take also. Keep in mind that he can potentially take 6/12 of next year's refund if you file at the end of June, 7/12 of it if you file at the end of July.

If the trustee sees a 6000 refund for this year, he will likely estimate that you will get 6000 for next year, and he would want to take about $3000. This also means that he'll keep your case open until he gets your tax return next year.

Also, if your lawyer gives you a choice, file BK on the day after your pay period ends, regardless of when you get paid. If you do this, you will have $0 earned but unpaid wages. Plan your bank account to have near $0 on the day you file. This must be the actual balance regardless of what has cashed/not cashed. I know this is off topic, but I feel like I should pass on my relevant CO experience.

The business is my source of income, once it is shut down I will not need to worry about those pesky unpaid wages, since there will be none!

Thanks for sharing what happened with your refund.