Tax REFUND Question when filing chapter 7

[kendricksjoy]

My husband and I will be filing bankruptcy sometime in March or April. We have passed the Means Test and currently have no assets. We estimate that we will be receiving $6,000.00 in tax refunds once we file our taxes. Will the bankruptcy trustee keep this money or can we claim it as an asset when filing and keep the money? We live in Georgia. Thanks very much!

[JEM]

We will be filing at the end of March-beginning of April too.

We usually file our tax return at the end of Jan. or beginning of Feb. and receive the refund a week or so later. Our plan is to file our taxes and use some of it for attorney fees and for necessities like stocking up on groceries, paper products, eye exams for my husband and son (and most likely new glasses) and some auto maintenance.

Now, our refund will be significantly less than yours (more like in the $2400-2600 range). But I believe from what I have read, that it's ok to file your taxes and spend it on NECESSITIES BEFORE you file for bankruptcy.

[keepmine]

If your lawyer can't exempt it, you need to spend it down prior to filing.

[debt86]

True ,so make sure its disposed of before you file bk.

[tlcabk]

Doesn't it still count as income if it is received during the 6 moths prior to filing? If so, can you just have the gov't reapply it towards your next years (filing in Jan 2011) Taxes, then change your filing status on your paycehck after you file to tak out less taxes?

[kendricksjoy]

If I spend my tax refund prior to filing BK, will I need to provide receipts for the trustee? Which types of purchases qualify as neccessities?

Thanks for your much needed help.

[JEM]

If I spend my tax refund prior to filing BK, will I need to provide receipts for the trustee? Which types of purchases qualify as neccessities?

Thanks for your much needed help.

I've read that yes, it's best to save receipts.

I know we will be.

From my reading here...things that seem to be acceptable to spend the refund on are...

Home maintenance (if you have a home that you are KEEPING, otherwise, it would be a waste of money)

Auto maintenance (repairs, new tires, routine maintenance)

New clothing and shoes (reasonable stuff--not furs or extremely high end clothing)

Medical/Dental/Eye exams, glasses, contacts

Stocking up on food, paper products, cleaning supplies, toothpaste, shampoos etc...

[justbroke]

Doesn't it still count as income if it is received during the 6 moths prior to filing?

This varies by District. In some Bankruptcy Districts, the local rules require the attorney or debtor to include any tax refund as income. This is done by taking the average income tax refund and dividing by 12 and adding that amount to the already calculated "current monthly income". Also, the "six month" lookback doesn't apply to income tax refunds.

Most people believe that income tax refunds are not "income" because it's from withholdings. The problem is, that it is from "overwithholding", meaning that your claim of