Bankruptcy and the Tax Refund
During tax season, it is especially important that you review with your client the pros and cons of filing bankruptcy prior to the client receiving his or her tax refund. You should inform your client that if he or she submits a petition to the court prior to getting a tax refund, it could be considered as property of the bankruptcy estate. Also, keep in mind that if your client's refund is not covered by state exemption laws, the refund will become a part of the bankruptcy estate.
As a starting point, find out if your client has filed his or her income tax return and whether or not a refund is expected. Based on this information, you can better advise your client concerning the feasibility of saving all or part of the refund from the bankruptcy estate. Careful planning on your part, may assist your client in preserving much needed funds in tough economic times.
Ok...very confused. Will call my attorney tomorrow and see if I can get more answers specific to my case. I was totally unaware that we would get a refund this year and was not advised about this being a problem by my attorney. Our meeting of creditors was Jan 7 and it is not discharged until Mar 10. The only answer I have gotten from my attorney so far was to wait as long as I can to file it. After researching, it doesn't seem to matter. It will be considered an asset Jan 1 whether filed or not, correct? So, what to do now? What is the time frame that the trustee could ask for it? I read someone's case where it was a year? Some act like it is rare to have to worry about it and other sites say it is routine. What is your opinion? We filed Ch 7 in Texas. Thanks-
We filed for bankruptcy in the state of Idaho in December 08. We were told as soon as we get our refund, we must turn it over to the trustee before they can finalize it. Our refund check was in the amount of $13,100 - ($2900 of which was state). We lose it all right? We have 4 kids, but 3 homes all going into foreclosure so I can't complain too much since I am going to live "rent free" for over 11 months in a $2500 per month mortgage, but with them wiping out all our assets, it would sure be nice to keep our refund or at least a small portion. Just curious if we will be able to keep any of it since this was money that was borrowed by the federal government from us and that they owe to us. Thanks!
i've been a business man for years now and personally i really don't know when is the right time to declare Bankruptcy. but with this blog somehow it had given me some idea... thanks Kevin!