Filing tax return and refund timing

[Spaghetti42]

Hi all,

(I did try to search for this but didn't find quite what I was looking for)

Filed my Ch 7 on Dec 23, 341 meeting is scheduled for Feb 11. I usually file my return early because I need the money from my refund. I am waiting on my 1098-t form which I will have on Wednesday (Jan 22) and technically I will be able to file at that time since I will have all the necessary paperwork. I am anticipating about a $1300 refund (could be as small as $700).

Attorney says I should wait until after 341 meeting to file my tax return. Since Ch 7 is a "snapshot" on the day you file will this even be taken into account? I was also reading on various sites that your tax refund is considered an asset because it is money owed to you. Atty says I shouldn't worry about exempting it, but I am kind of second guessing that. I tried to find the amount that one can exempt but I wasn't able to find that (wildcard, etc). I could really use the money and it might even be too late to file after my hypothetical discharge which will be mid-April. Help! What are thoughts on this?

[keepmine]

Here are wa.'s exemptions. You can also use federal exemptions. Both offer a wildcard.

http://www.thebankruptcysite.org/exemptions/washington.html

I'd certainly ask my lawyer why it shouldn't be exempted.

[BrokeDavis]

I'm going through the same thing and my attorney told me to file my taxes return and spend it before I file my bankruptcy

[justbroke]

Unfortunately, you will need to find an exemption to protect the anticipated tax refund. The tax refund is property of the bankruptcy estate!

Here's why.

It does not matter when you file your tax return, it matters that it is an overpayment which was due to you at the time of filing. Trust me, the Trustee is going to ask about this tax return -- unless you exempted it -- because this is the time of the year where Chapter 7 Trustees can actually make money (by going after tax refunds).

I would quite firmly ask my attorney to exempt my anticipated refund if I had available exemptions. This may be the first time I have read where an attorney said to not worry about exempting the anticipated refund. Spending a tax refund before filing is typically advised and is okay. Hiding a tax refund from the Trustee, is another thing. Most Trustees will seek to obtain the portion of the refund that covers the period prior to filing. If you file in July, the Trustee will want 1/2 (6/12). if you file in December, the Trustee will want most of it (11/12ths).

Unless your entire refund is really small and insignificant I can't see a Trustee not wanting the refund (don't ask me what would make the Trustee want your refund, but I figure $600 or more could be worth it for the Trustee -- I have read about Trustees waiting for a $1,000 refund in Florida). This is the time of year when Trustees are highly keen to this being tax return season. Just ask your attorney why you should not worry given that it's tax seasons and you are expecting an overpayment to be refunded. Perhaps your attorney knows something about your particular Trustee that we don't know.

(FYI: there are some portions of a tax refund that may be automatically exempt such as the Earned Income Credit. However, you need to put the Trustee (and creditors) on notice that a portion, or all, of the anticipated refund is EIC.)

[Spaghetti42]

Thank you justbroke. I will call my attorney and ask why it shouldn't be exempt. I really don't want to lose it cause I need to buy a car and that is a good chunk of change. I'm assuming I will have to amend my filing to include that amount. :-(

[justbroke]

Thank you justbroke. I will call my attorney and ask why it shouldn't be exempt. I really don't want to lose it cause I need to buy a car and that is a good chunk of change. I'm assuming I will have to amend my filing to include that amount. :-(

Well, your attorney may be hoping that the Trustee doesn't want it. Washington State does not have particular great exemptions for cash (I think the most you can exempt is $1,500). Don't take my word for it, especially since this is the "Internet". I would just make sure that you understand your attorney's strategy. Your attorney knows a lot more than I do about your case, your District, and your Trustee!

[rustymich]

Sounds to me like your doing all the leg work on your bk,I did most of mine...If its money they want to no about it.Hiding something will get them digging they do it for a living and no what there doing..Mine looked me straight in the eyes the whole time and I did back...Good luck

[bcohen]

Even at the time of my 341 meeting, which was in June 2013, the trustee asked all of the people about their tax refund for the PREVIOUS year (2012), and asked many of the people to notify his office when they file the CURRENT year (2013) tax return so he could take a portion of the proceeds. Fortunately, in my case, I had carefully timed the bankruptcy so that all of the 2012 tax refund proceeds were received and spent BEFORE filing, and there were no 2013 tax refund proceeds to attach either.

[ValleYum]

Thank you justbroke. I will call my attorney and ask why it shouldn't be exempt. I really don't want to lose it cause I need to buy a car and that is a good chunk of change. I'm assuming I will have to amend my filing to include that amount. :-(

Do you know which exemptions your attorney filed with? Federal or Washington State? Federal has a nice size exemption that can be used for cash or tax refunds if you have little to no home equity to protect.

[Spaghetti42]

No, I've put in a call and I am waiting to hear back. I don't own a home so have no equity for that. Will update when I talk to her again.

[gemsnroses00]

The previous year tax refund was looked at in our case, and it was determined that we would get a similar tax refund. We had to turn it over when we received it, boo! If I had a do over, I would have waited, Dec was not a great time.

[tobee43]

I'm going through the same thing and my attorney told me to file my taxes return and spend it before I file my bankruptcy

jb this is EXACTLY what we were told to do. file and spend it ASAP it was the biggest return we ever had ever! thousands, shoot i was so scare, but the atty was correct. it's in approx. the timing is oct bad time where trustees interests are usually peeked. however, i have seen it happen anytime of the year now.

jb we never had to use an exemption to protect our huge refund. we filed our taxes in feb., got the huge amount.(in the high 5 figures) spent in about an hour. we were never asked at our 341 or prior since we were at many times in our process; which was so complex, dealing directly with the trustee office personally via email.

[justbroke]

If you can time it correctly, obtaining your refund and then spending it on household goods, health and welfare of your family, and not on avoidable transfers, is a good thing. Paying your attorney is a good thing. In some States, stocking up on as much as 6 months worth of food, heating oil, etc, is also allowed!

Just work with your attorney on what you could spend any refund prior to filing.