How much of my tax refund will I be able to keep?

[my2girls]

Hi All,
Quick question I am unclear about. We filed chapter 7 on 9/23/11 discharged on 12/20/11. I am unclear the amount the trustee will take from our Federal income tax return. I thought it was exempt? When I spoke with my attorney today it sounded like they will take 3/4 of the return. We typically get b/w $1000-$2000. Any thoughts?

[adams8866]

They are taking 84% of ours or 308 days worth. I don't know if that is a prorated amount. I assume it is.

[justbroke]

It depends on what State you live in and what exemption scheme you used. It also depends on whether you or your attorney attempted to exempt any portion of the "anticipated" tax refund.

If you live and filed in Florida, you probably didn't have enough exemptions left over to cover the tax refund.

As adam pointed out, the amount the Trustee wants is typically pro-rated based on the time of year that you filed. Since you filed in September, 3/4 seems about right.

[prindia]

How would one know if their taxes will be taken? I was not told anything at my 341 metting today in reference to my taxes.

[LadyInTheRed]

How would one know if their taxes will be taken? I was not told anything at my 341 metting today in reference to my taxes.

Look on your Schedule C to see if your anticipated refund is exempted. If it is, you will be able to keep your refund unless the trustee objects to your exemptions for some reason. If it is not exempted and the trustee wants your refund, your case will be declared an asset case and you should get a notice telling you how much of your refund to turn over.

[justbroke]

If you are an asset case, that pretty much means that the Trustee wants "something" from you. Follow LadyInTheRed's instructions. If you can't find anything and you know you're a no asset case, then your refund is yours to keep.

If you talk to your attorney again, ask them if you are an asset case.

[prindia]

Thanks Guys.. I will call them in the morning to see I am an asset case. According to pacer I wasn't but I know it can change after the 341.

[luckstyl]

so does this mean that if I am declared a no asset case, I can go ahead and file my tax return without fear of the refund being taken by the trustee?

Or did I have to exempt it when I filed?

[luckstyl]

My attorney and I never discussed exemptions at all, because I own almost nothing at all. We listed like $50 for some golf clubs, $50 for my TV, and some clothes. That's all I have, really. The car I drive belongs to my dad, my name isn't on it at all. No house, etc. So I don't think my attorney exempted my anticipated tax refund because we didn't discuss it.

[df04527]

Do you have a copy of what was filed you could reference?

[luckstyl]

Still waiting for it to come in the mail.

[btbeme]

Income tax refunds are really nothing more (in most cases) than deferred income. It works like this...

- If you file on October 1st, you have passed through 9/12 (3/4) of the year. The federal government, at your behest, has withheld, say, $2400 in income from your paycheck up to that point that you might normally expect to see again after you file your income tax return after the first of the year. Some people mistakenly rely on this refund to pay for Christmas, etc. thinking that it is "found money" or some sort of forced savings account.

- When you filed on 10/1, you said that you had $xxxx in income for the last 6 months. That may be true, from your standpoint...but in actuality you had $xxxx + $2400 in income. The Trustee may or may not have pointed this out; your attorney should have. I say again - your attorney SHOULD HAVE. No excuses.

- The $2400 in withheld income is probably in excess of your cash or other exemptions allowed, because you you likely maxed your exemptions. Unless the withheld income was INCLUDED in your exemptions, it is now fair game for the Trustee.

- The Trustee can and will grab that cash. Period. If you see a nickel of it, consider yourself lucky.

It is cash, sitting in an account, due to you. Not your account, but the Fed's account. It now belongs to the Trustee, unless he/she has an attack of generosity that does not often happen, since that is their job.

Grabbing your tax refund is the Trustee's job. Keeping that from happening is a cooperative effort between you and your attorney - your for not planning ahead and dropping your withholding as low and humanly possible, and your attorney for not helping you prep for the inevitable. Sorry, harsh, but true.

Anyone filing between early September and tax season stands to lose most or all of their refund. If you don't want that to happen, plan ahead. Thats all that I really can say, other than I am sorry it happened to you.

[luckstyl]

Who was that meant for? My refund will only be about $350 because I have very little withdrawn from my checks for this exact reason.

[btbeme]

Who was that meant for? My refund will only be about $350 because I have very little withdrawn from my checks for this exact reason.

Awesome - that is a very small price to pay. The above was meant for the people who will do a search of these forums wondering the same thing you did. Hopefully it will help them to plan ahead, and at least ask their attorney for the best route ahead.

Sorry that you would lose anything. Sometimes it is unavoidable, but glad that it isn't a huge Trustee bonus check. Trustees that I have spoken with have called this their Scrooge time of year.

[btbeme]

so does this mean that if I am declared a no asset case, I can go ahead and file my tax return without fear of the refund being taken by the trustee?

Or did I have to exempt it when I filed?

Depends...if the Trustee anticipated that you would have little or no refund, you are probably clear. Most Trustees will give you a very clear statement that they intend to take the refund if they intend to do so. Best case is that it was exempted to begin with. Next best is that it is too small for the Trustee to worry about, because you planned ahead to minimize your withholding.