Possible tax refund after chapter 7 discharge

[vee1]

I was discharged in January 2014 and filed in October 2013. I didn't think I'd get a tax refund, but money I earned in November and December 2013 had more taxes taken out than I thought. If I get the refund I would need it for my property taxes due April 10--though since I haven't filed my taxes yet most likely I wouldn't get any refund in time to pay them, or I could use it toward my estimated taxes--if I use it for estimated taxes for this year--can the trustee take it? It's under $1000 and in October my exempt cash was $373.

[justbroke]

This is completely specific to your individual case and District. Did you exempt the "anticipated" tax refund? If so, in what amount did you exempt the refund? Did your attorney, or you, otherwise calculate your average overpayment (refund) and add that to your Schedule J income? Did the Trustee specifically ask you about your tax refund?

Also, you would not be allowed to apply "non-exempt" overpayments (refunds) to future tax. Your bankruptcy estate came into creation on the day you filed. Anything that was a "non exempt" overpayment was property of the Estate. You can't just use it to pay taxes that became due (or are estimated taxes that may have become due) after filing.

The real questions are a.) is your case closed and b.) was the Trustee expecting to see your tax return and/or wanted your refund? If you are represented by an attorney, you should ask them this question. If you are pro se, then you need to look at how you exempted the "anticipated" (or unanticipated) refund or otherwise accounted for such in your Schedule J. If either you or your attorney have not accounted for this, and there are no exemptions to cover this, you may have an issue. I suppose you could go "argue" that most of the refund as from November/December 2013 (post filing), but the Trustee would probably still try to obtain 10/12 (3/4ths) of any "non exempt" refund.

[brokehmowner]

How do they obtain this information? Does the IRS report to the trustee? Does the trustee, even after the case is closed, inquire of the IRS for all chapter 7's filed? Just wondering because we did get a tax refund but my attorney didn't mention a thing about tax refunds to us during or after the discharge and case closed. We were discharged and closed in December 2013.

[brokehmowner]

Never mind. Through searching I have found that trustees actually do go looking for tax refunds during tax season. Good thing we haven't spent it! (or should we? LOL!) We were saving it for a new heat pump but we need a couple thousand more.

[tobee43]

brokehmowner. we had a HUGE high 6 figure return our year that we filed, because we gave away to state and county charities valued at over 50k, why because we had some rare items to donate to the state, also instead of selling everything before we left our 4500sq foot home we donated to the county agencies to help needy families, of course we were needy as well. it worked on our petition we attached the receipts since they were directly from the state and the county there was no problems with the trustee . our atty said spend it ALL ASAP. we did and not a peep from the trustee and we had out 341 on april 4th. in the 7 it wasn't asked for. maybe things are changing, but we had no problem spending our return which we used for moving expenses, another TAX deductible item.

[LadyInTheRed]

Never mind. Through searching I have found that trustees actually do go looking for tax refunds during tax season. Good thing we haven't spent it! (or should we? LOL!) We were saving it for a new heat pump but we need a couple thousand more.

If your case is closed, you can probably keep your refund. The trustee would have to reopen your case to get the refund. Not likely to happen. To be certain, call your attorney and ask.

[brokehmowner]

Thanks! I'll check with him, although he somewhat has the attitude that his services are over for me. I tried to get him to nudge the court to close the case since it had already been discharged but he huffed and puffed and did nothing. I ended up calling the court myself and the clerk decided to go ahead and close right there on the spot.

[bcohen]

If your trustee was planning on administering assets, he would have kept the case open. Since your case is closed, it is highly unlikely that the trustee will bother filing to reopen it for a tax refund of less than $1000. Heck, even if the case were still open, most trustees don't bother harassing debtors for non-exempt assets totalling less than $1000, because the benefit to creditors (and to the trustee) would be too small.

When I filed for Chapter 7, I had about $600 above the stingy Arizona exemptions, and the trustee didn't bother trying to make it an asset case over that little amount of money. I very seriously doubt your trustee wants your tax return, especially this late in the game.