Education Credits and the estate

[dspii]

I got a tough one for any BK smart people, it involves an unexpected HUGE tax refund that I was not expecting. Details:

Filed - Aug. 2009
Disch - Dec 2009
Asset case - they want my 2009 tax "return" and the "refund" (Is this OK HHM? )

I just did my taxes and wella.....I will get back almost $3000 more than I paid over the year. Further examination revealed that the Obama Package is allowing a big refundable tax credit for education.

So here's my question, I filed BK August, my kids started college in September. Since the expenses and associated credits were realized after I filed....is the trustee able to include this in the estate?

I thought well considering I Bk'd $85k, giving up $5k isn't so bad, until I realized that the expenses occurred after my official filing date.

I asked my lawyer, cause I paid him, but I ask you because I trust your responses more than his.

Any thoughts?

[OhioFiler]

Your trustee will want 7/12ths of your refund. Period.

One time I filed my taxes and 6 months later I realized I had forgotten to claim a deduction so I filed an amended return.

[justbroke]

So here's my question, I filed BK August, my kids started college in September. Since the expenses and associated credits were realized after I filed....is the trustee able to include this in the estate?

The Trustee should only be entitled to 7 or 8 months of your income tax (over) withholdings. This includes any "credits" with the exception of the earned income credit. That being said, you should expect that the Trustee wants 7/12 or 3/4ths of your income tax refund.

I thought well considering I Bk'd $85k, giving up $5k isn't so bad, until I realized that the expenses occurred after my official filing date.

Your are correct to think that way. However, you are also correct that the Trustee is not entitled to all of it.

[dspii]

The Trustee should only be entitled to 7 or 8 months of your income tax (over) withholdings. This includes any "credits" with the exception of the earned income credit. That being said, you should expect that the Trustee wants 7/12 or 3/4ths of your income tax refund.

Your are correct to think that way. However, you are also correct that the Trustee is not entitled to all of it.

I understand the over witholding of taxes up to my filing date and in my case this amount would be minimal, it's the refundable educational credit that jacked up my refund. My thoughts are...since the expense and refundable credit were established after the BK date, it would be outside of the estate. I know it's wishful thinking, but damn, I didn't expect that kind of refund. And again, I believe it's fair, no matter what the outcome, considering the alternative.

[justbroke]

My thoughts are...since the expense and refundable credit were established after the BK date, it would be outside of the estate. I know it's wishful thinking, but damn, I didn't expect that kind of refund.

Since you didn't expect it and were able to discharge $85K of debt... what's the problem? If your attorney wants to fight over the credits, that could cost you more in attorney fees, eating into the refund. I just want you to pick your battles. I think you do have a point, but the real question would be... is it worth the fight?

[dspii]

Since you didn't expect it and were able to discharge $85K of debt... what's the problem? If your attorney wants to fight over the credits, that could cost you more in attorney fees, eating into the refund. I just want you to pick your battles. I think you do have a point, but the real question would be... is it worth the fight?

Definately not worth the fight...I am grateful to have my discharge and happy to supply them my refund. I just want to see what "is" and "is not" part of the estate and how all these new refundable credits affect those who have filed. I am sure this will be a very popular subject when tax returns are sent to the trustee, as the amount of refundable credits are on the increase this year.

Maybe my lawyer can ask the trustee or maybe I just lay low and begin my new life. I figure if I don't ask about my particular circumstance the status quo will apply otherwise.

[justbroke]

Maybe my lawyer can ask the trustee or maybe I just lay low and begin my new life. I figure if I don't ask about my particular circumstance the status quo will apply otherwise.

It is definitely worth asking.