Timing of my discharge and keeping my tax refund

[tyson24]

I am filing next week. I anticipate my 341 being the first week in November. If all goes well, my discharge would be the first or second week in January.

Will the trustee want my tax refund if I am discharged before taxes are filed?

Could it go either way based on the trustee?

[tod183]

My understanding is that the refund on the money you made during the year before you filed would belong to the bankruptcy estate. So, assuming you paid equal amounts every month, about 3/4 (9 months out of 12) of your refund would belong to the estate. My lawyer said to try to make my refund as low as possible, since it would be just as much work for the trustee to get a small amount as a large amount, and so the trustee may just say to keep it if it is small.

[jelo6875]

tod183....I was wondering about this scenario because I lost my job in May....haven't found another so my husband has been sole supporter and our income has dropped around $25 thousand....so our tax return will be rather large compared to owing most previous years. How do you go about reducing that? Changing the amount that comes out of your paycheck?

[tod183]

If you already have enough in that you'll be getting a refund, have them stop witholding any now. My lawyer also said that when I file, try to do it in such a way that will reduce my refund, for instance, not claiming things I may be eligible for (earned income tax credit, child & dependent care credit, etc).

[tobee43]

My understanding is that the refund on the money you made during the year before you filed would belong to the bankruptcy estate. So, assuming you paid equal amounts every month, about 3/4 (9 months out of 12) of your refund would belong to the estate. My lawyer said to try to make my refund as low as possible, since it would be just as much work for the trustee to get a small amount as a large amount, and so the trustee may just say to keep it if it is small.

that was not the case in our district....we had a substantial tax return coming right as we were filing. our atty advised us to spend every single dime asap.....we did and the trustee never mentioned it.

i think it depends on where u file.

[chriselle]

can't you cover it with the exceptions allowed?

[tobee43]

can't you cover it with the exceptions allowed?

each state...district...and in come cases counties have different exemptions....so our return was big...a very large refund and would have never worked in the exemptions categories we were allotted.

[tod183]

that was not the case in our district....we had a substantial tax return coming right as we were filing. our atty advised us to spend every single dime asap.....we did and the trustee never mentioned it.

i think it depends on where u file.

It sounds like you were filing early on in the year. Your refund would have been from the previous year. If you filed, for instance, in March 2010, the refund that would belong to the estate would be the January to March, 2010 refund (which you'd receive early on in 2011). Most trustees wouldn't want that little. My lawyer said that they usually start looking at refunds at around the 6-month period, so around July onward.

I would guess that the reason your lawyer told you to spend your previous year's refund would have been because cash-on-hand also belongs to the estate.

But you are definitely right in that it varies by district and trustee.

[tobee43]

It sounds like you were filing early on in the year. Your refund would have been from the previous year. If you filed, for instance, in March 2010, the refund that would belong to the estate would be the January to March, 2010 refund (which you'd receive early on in 2011). Most trustees wouldn't want that little. My lawyer said that they usually start looking at refunds at around the 6-month period, so around July onward.

I would guess that the reason your lawyer told you to spend your previous year's refund would have been because cash-on-hand also belongs to the estate.

But you are definitely right in that it varies by district and trustee.

we filed in april....and in as much as a projected tax refund for 2011....the trustee knows most likely we will be paying and NOT rec'ing a refund as we surrendered our home...(the property taxes and mortgage interests) are no longer deductions...as well as we both lost our jobs...no more business expenses, so on and so forth.

yes, you cannot have that much cash on hand when filing, but again i will stress it depends where you are and what type of bankruptcy your file. i do believe whenever and however much it is in a chapter 13...you need to turn it over. but someone will correct me on that if i'm wrong.