Tax refund question

[bktmom28]

I couldn't find the answer to this so I thought I would ask here. I have filed Bk here in Oregon and from what I can find, when you do your taxes and receive a refund based on the Child Tax Credit and the EIC, those are exempt from the TT. I have seen mixed responses, but is there anyone who knows the right answer? We changed our allowances so that we could get a little more back in my husbands paycheck for Christmas, but I still know that we will get a refund based on those credits. I honestly don't care if the TT takes our refund, but I am so worried they will go after my husbands ailing grandma for a preferential payment if our refund is too much. I thought maybe I would file our taxes and use the standard deduction, and then amend my taxes on April 15th after we are discharged and everything. I know, it may seem dishonest to some, but believe me, I just don't want them to go after her. She is not doing well and I am afraid of the toll that it will take on her health. Any advice would be greatly appreciated. We have 40K in unsecured debt and so I am thinking that it would have to be a pretty hefty sum for them to take the refund and the money paid back to his grandma.

[JoeBankrupt33]

The EIC is safe. The child tax credit is probably not. Any amount of your refund that is greater than the EIC amount is probably at risk. Then, the TT can take a prorated portion of the refund based on what day you filed. For instance, if you filed Dec 1, then the trustee can take 11/12 of the non-exempt amount.

[Mi Bankruptcy]

It really depends on your district on whether they will take your tax return. Your attorney should know the answer to this. However, to make sure you are safe you should exempt your tax return if you have room left. Here is how I did ours at the end of 2008.

We are CH7 no asset with plenty of room left in our exemptions.

Schedule B
Anticipated 2008 Tax return $6,000

On Schedule C We listed:

We 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

[justbroke]

As Mi Bankruptcy wrote, there are two ways to exempt an "anticipated" tax refund. One is to use the exemptions available to you under your State's bankruptcy laws. This is the primary way that people exempt the refund.

This varies by State because:

• Your State may not have a specific income tax refund exemption
• You may have exhausted all the "wildcard" exemptions provided for by your State
• Your State specifically excludes cash or refunds from exemption
• Your State may not specifically exempt Earned Income Credit (EIC)

For example, many States exempt "public assistance" and many have equated public assistance with EIC. In most of those States, EIC is not "public assistance". Florida, and the smart States, specifically have an exemption for EIC (F.S. 222.25(3)).

Oregon does have a specific statute to cover EIC under ORS 18.345(1)(n). You'll have to check, but I think the EIC thing was added to ORS recently.

O.R.S. 18.345(1)(n) The debtor's right to receive an earned income tax credit under the federal tax laws and any moneys that are traceable to a payment of an earned income tax credit under the federal tax laws.)

[Mi Bankruptcy]

I would like to add, my attorney told me not to worry about our trustee, they don't take your tax returns. However, I found a case in Michigan where the trustee went to take it and it had to go before the judge. The judge said, well the trustee gets the money because it was not exempted. I basically had to tell my attorney that I don't care what the trustee typically does or does not do. I needed a way to exempt it. I had reaffirmed some vehicles and wanted to use that money to pay off the vehicles..lol