Can trustee use tax returns to pay creditors in chapter 7?

Asked over 1 year ago - Union, MO

Just filed my tax return. I am in chapter 7. Can they take my tax return?

Attorney answers (10)

  1. Megan Dyanna Dennis

    Contributor Level 5

    8

    Lawyers agree

    Answered . Yes, a Chapter 7 Trustee can take a tax refund to pay creditors. The Trustee will likely request a copy of your tax return to see how much of a refund you are entitled to. You will need to comply with his request. Do not spend any portion of the tax return until the Trustee gives you permission to do so. You may be able to exempt some or all of your tax refund. A local bankruptcy attorney should be able to help you with this.

  2. Carl H Starrett II

    Contributor Level 16

    6

    Lawyers agree

    Answered . Maybe, but it depends on how much our refund is an whether you have any available exemption money available to protect the refund. Yo should contact a local bankruptcy attorney ASAP.

    First, the firm is a debt relief agency according to the U.S. Bankruptcy Code. We help people file for bankruptcy.... more
  3. Brenda Stacey

    Contributor Level 5

    2

    Lawyers agree

    Answered . A trustee may "take" any asset that is not exempt, including your tax refund. Typically, the refund would have been listed on your Schedule B (personal property) and then exempted on Schedule C. If you filed the bankruptcy without an attorney, you should probably contact one. If you were represented by an attorney, contact your attorney to discuss your refund. Either way, though, DO NOT SPEND THE REFUND until the trustee abandons the asset.

    This is intended as general informational material only and is not intended to offer legal advice. You should not... more
  4. David Samuel Shevitz

    Contributor Level 7

    3

    Lawyers agree

    Answered . It depends on whether you exempted the tax return or if you have any available exemptions to exempt the tax return.

    Typically Chapter 7 Trustees assigned to a case will often go after tax refunds that are not exempted if they are $1,000.00 or more so make sure to consult a bankruptcy attorney for further guidance.

    I practice law in California and do not practice law in your state. This answer is for informational purposes... more
  5. Dorothy G Bunce

    Pro

    Contributor Level 20

    3

    Lawyers agree

    Answered . Did you address this asset on Schedule C of your bankruptcy petition? BTW, the Trustee will take the refund unless this asset is exempt. In all likelihood, the trustee will require you to provide a copy of the tax return, which is the paperwork. Hope this perspective helps!

  6. Robert Michael Fox

    Contributor Level 10

    3

    Lawyers agree

    Answered . If your refund was not claimed as exempt under an appropriate exemption statute all or a portion of it would constitute BK estate property, thus enabling the trustee to distribute it to your creditors. Practically speaking, the amount would have to be enough to pay the trustee his disbursement fee plus $ to your creditors, otherwise he probably would abandon it.

  7. Todd Stoneman

    Contributor Level 4

    2

    Lawyers agree

    1

    Answered . I just wrote a blog on this topic. Give it a read ... hope it helps!
    http://stocolaw.com/blog-2/

  8. Michael Avanesian

    Pro

    Contributor Level 16

    2

    Lawyers agree

    Answered . Depends on a lot of things, if this money is significant, I would get an attorney. If it's not, try the best you can to exempt as much as possible. I personally would always get an attorney!

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more
  9. Richard Edmund Hawkins

    Pro

    Contributor Level 16

    2

    Lawyers agree

    Answered . The trustee is entitled to the amount to which you were entitled at the time of filing.

  10. Jeffrey B. Peltz

    Pro

    Contributor Level 15

    2

    Lawyers agree

    Answered . The Trustee will be able to use the tax refund if you didn't exempt it. In the event you didn't exempt it and you have exemption available you can still amend your petition. You should speak with your bankrutpcy lawyer. If you didn't use a bankruptcy lawyer you should consult with one ASAP.

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