Taxes in Bankruptcy are an important issue. Today lets talk refunds. Can the Trustee take all or part of my tax refund ?
Chapter 7
In Ohio especially in the Southern District of Ohio (Columbus, Dayton and Cincinatti ) the Chapter 7 trustee will calculate the portion of your tax refund based on a number of factors
- The month you file. If you file in October the trustee will view that 5/6 or 83% of your refund is part of the bankruptcy estate. Even if you do not file until after January. The refund can stilled be protected by your exemptions. (Cash, Wild Card, Earned Income Credit and Child Tax Credit ). ie. If you file in October and get $1000 refund when you file. $830 is considered part of your bankruptcy estate even if you do not have the money on the Day you file.
- If you file after January 1 your entire refund is considred part of the bankruptcy estate. You still get your exemptions ( see above )
- If you file after you spend your refund, the trustee is going to ask you to provide proof of where you spent the money. This can be in the form of checks, receipts and/or bank statements.
Chapter 13
In the Southern District of Ohio the Chapter 13 trustees and the New Bankruptcy Rules provide the following:
- You must provide a copy of your taxe return to your attorney every year. Your Your Attorney must send them to the Chapter 13 Trustee for Review.
- The Local Bankruptcy Rules allow you to keep $3000 of your tax refund or your Earned Income Credit and Child Tax Credit. You keep the larger amount and turn over the balance to the Chapter 13 Trustee.
- You must file in a timely fashion. The trustee’s frown on extensions unless there is just cause.
You can estimate your tax refund by using these handy tools from the IRS. You can then change your exemptions to try to protect your refund.
2. IRS on Youtube explaiing how to use the calculator
You can learn why the timing of a bankruptcy is important by calling Wayne Novick or Elizabeth Chinault for assistance.