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

Union, MO |

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

Attorney Answers 10


  1. 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. We also do other stuff and we do it well, but Congress wants me to post this notice. Second, nothing on this site is legal advice. You are not my client unless you enter into a written agreement signed by you and me.


  2. 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 analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here. Please visit my web site: www.avanesianlaw.com for more information about my services.


  3. 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 only. This answer does not constitute legal advice, create an attorney-client relationship, or constitute attorney advertising.


  4. 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!


  5. 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.


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


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


  8. 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.


  9. 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.


  10. 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 rely on or use information presented here without consulting a lawyer regarding your specific circumstances, changes to applicable laws, rules and regulations, and other legal issues. Answers herein do not establish an attorney-client relationship. Please contact STACEY LAW FIRM for further information. (636) 642-1166