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Can my tax refund be garnished while I'm in the middle of filing for chapter 7?

Chicago, IL |

I haven't paid my lawyer fees in full yet, but I'm waiting for my tax return so that I can pay my lawyer in full. Is there anyway that my tax refund will be garnished by any of the debt that I owe. My paychecks are not being garnished but I'm just afraid that since I have so much debt that my tax refund will be garnished because of the large amount that I will be receiving

Attorney Answers 3

  1. You really need to call your attorney on this one because it depends on several specific facts of your case. If you have creditors that have gotten judgments and filed citations to discover against you, then yes, they could try and attach your tax refund. They could also freeze the bank account that the funds are deposited into. If you owe the IRS, they can offset any debt that you owe them by withholding that portion of your refund.

    Some of your refund may be exempt under federal laws, depending on the credits and deductions that you are entitled to, but this would have to be dealt with by your attorney when he/she has a copy of your tax return in hand.

    Call your lawyer, that's what you pay them for.

  2. I'm going to assume that you haven't yet filed, because a reputable lawyer knows that your obligation to pay a fee in the future is a dischargeable debt and that he or she would violate the bankruptcy stay by asking you to pay post-petition. A tax refund is subject to offset for past-due taxes, federal student loans, and several other specific kinds of federally-related debts. Once the refund is in your bank account, it is subject to court-ordered seizure to pay judgments. If someone were able to get more than $600 this way, you would be able to get it back (with the help of a good bankruptcy lawyer, that is) if you were to file within 90 days after the seizure.

  3. There are limited situations where a tax refund can be garnished, mostly involving things like arrearages on student loans or SBA loans.

    The IRS and State taxing authorities can also intercept a tax refund to cover unpaid taxes.

    If your bankruptcy has not been filed, then these refunds are likely to be fair game, but this also as much an issue of State law as it is a matter of your rights in bankruptcy.

    You need to consult with the attorney that you have hired to address this question.

    I also agree with the comment that the outcome would be different if the bankruptcy has been filed, but if you still owe your attorney money then the bankruptcy should not have been filed unless the attorney intends to waive any additional fees.

    An attorney cannot collect a fee post filing in a Chapter 7 bankruptcy since your attorney cannot be a creditor of yours.

    The information provided is not intended as legal advice. No Attorney/Client relationship is intended, implied or created.